Define accommodating monetary policy

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After eight years of economic recovery, inflation remains below the FOMC’s target.Dissecting the underlying price data by spending category reveals that low inflation largely reflects prices that are relatively insensitive to overall economic conditions.Notably, modest increases in health-care prices, which have been held down by mandated cuts to the growth of Medicare payments, have helped moderate overall inflation.

A simple regression model using a small set of macroeconomic explanatory variables can account for most of the run-up in the CAPE ratio since 2009, offering some justification for its current elevated level.Much as I want to know the future, I’ve long since recognized the dangers of our addiction to predictions, which are usually heralded by so-called market gurus.I’ll give you seven surefire ways to spot those purveyors of bad advice, but first let’s look at a far more useful set of forecasts.Official measurements typically approximate price changes from such creative destruction using price changes for products that were not replaced.This can lead to overstating inflation and, in turn, understating economic growth.

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