- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 4. Monetary Policy
- Subject 2. Monetary Policy Tools and Monetary Transmission
CFA Practice Question
To achieve its goal of price stability, the Federal Reserve uses as its operational goal the ______ and ______ set an official and formal target for the inflation rate.
A. core CPI; has
B. PCE; has
C. CPI; has
Explanation: The Fed stopped using CPI and instead is using PCE (Personal Consumption Expenditures). It has a 2% target rate.
User Contributed Comments 3
| User | Comment |
|---|---|
| Dannyl | They used to not setting an explicit inflation target since U.S. monetary policy focused on economic growth and achieving fully employment, along with containing inflation. Other countries who set an inflation target state price stability as the primary objective in monetary policy. |
| mdlofmn | On Jan 25th, 2012, the fed announced they will no longer use core CPI. |
| houstcarr | 1. the fed doesn't reference CPI for their inflation measure, they use the PCE index. 2. they don't use core PCE, the just use straight headline PCE. 3. they explicitly target 2% |