This is an R script caluclates the US Inflation over time.
On August 2020 the Federal Reserve changed their inflation policy to a Flexible Average Inflation Targeting (FAIT) policy . See more here
The new inflation policy seeks to get a inflation rate of 2% over time.
"the statement adopts a flexible inflation averaging strategy that seeks to achieve inflation that averages 2 percent over time in order to ensure longer-term inflation expectations are well anchored at 2 percent" here
Moreover, the new policy does not define a particular formula to calculate inflation over time
"In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting."Jerome Powell, August 27, 2020
One can therefore assume that, since the Federal Reserve lacks a specific formula, the FOMC might review a past time frame, such as 24 months, to calculate the average inflation for that period. This script aims to replicate that approach by performing a look-back over various time frames (e.g., 1, 2, 10, or 24 months) and determining the average inflation for each
The script contains a fuction
@param : overTime : if TRUE then plot inflation over time, else plot raw data
@param : startYear : start year of the study
@param : endYear : final year of the study
inflation(overTime, startYear, endYear)
# Plots inflation over time from 2005 to 2024
inflation(TRUE,2005, 2025)
Go to https://fred.stlouisfed.org/series/PCEPILFE to download the PCE data. edit the chart to set the units to Percent Change from Year Ago and download the .csv file. Make the script point to your downloaded file
table <- read.table([ PATH TO DATA GOES HERE], header = TRUE, sep = ",")
Raw plot
Plot for inflation over time
