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Inflation

Inflation. Background This is a forecast of U.S. inflation It is used to escalate constant dollar costs and values used in the planning process, such as natural gas prices, to nominal dollars Assumption

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Inflation

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  1. Inflation • Background • This is a forecast of U.S. inflation • It is used to escalate constant dollar costs and values used in the planning process, such as natural gas prices, to nominal dollars • Assumption • The Great Recession idled resources, particularly labor, and relieved inflationary pressures • The forecast calls for low short-term inflation, rising in the long-term • Change from the previous forecast: • Higher unemployment leads to lower shorter-term inflation • Higher federal deficits lead to higher long-term inflation • Ranges • Major drivers of uncertainty: • U.S. & world economic growth • U.S. fiscal/monetary policy • Technology/resources • The high and low range was developed using the range of forecasts from the Philadelphia Fed’s Livingston Survey of national economic forecasters • Forecast mean absolute % error: 1-yr=0.6%; 5-yr=0.6%; 10-yr=0.1% Inflation ― GDP Implicit Price Deflator

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