Story 2: Can the FED Control Inflation and Maintain Full Employment?

Assigned: Week 3 | Due: Sunday, September 27 at midnight Eastern | Points: 100

The Federal Reserve’s mandate from Congress is to control inflation and to maintain low unemployment. You can read about it here: Dual Mandate. These seem to be contradictory objectives - see this wikipedia article on the Phillips Curve. Another good but short news article which focuses on the specific context of recessions is here: Soft Landing.

For this story you will need to source the following data for the last 25 years:

• The Consumer Price Index (CPI) (Bureau of Labor Statistics) - note that there are numerous ways to define a CPI, and you can create a custom definition on the BLS page. If you want the standard CPI it is the CPI for all Urban Consumers, or CPI-U. You can find this and other BLS datasets here: https://data.bls.gov/toppicks?survey=bls

• The FED Funds Rate (FRED) (Federal Reserve Board) - This can be found here: https://fred.stlouisfed.org/series/FEDFUNDS

• Unemployment Rate (Bureau of Labor Statistics). I recommend using the seasonally adjusted rate.

Your data visualizations should be designed to answer the question “Has the FED been able to fulfill the mandate given to it by Congress?”

Notes:

1. I recommend using quarto to compose your report with either R or python for the visualizations, though you may use something different if you choose.
2. Remember, the FED raises rates after reviewing the CPI and other data, and unemployment (layoffs) occurs after company operating costs go up.
3. This assignment is due at the end of week four of the semester.