[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324251-105":59,"doc-detail-324251-en":131},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":124,"head_meta":126,"extra_data":128,"updated_unix":130},105,"en","monetary-indicators-and-the-federal-reserves-p-star","Monetary Indicators and the Federal Reserve’s P-Star","","Monetary indicators help policymakers judge whether policy instrument settings are likely to succeed or fail, but they influence decisions with delays and through shifting, sometimes conflicting signals from different policymakers. The document explains “Fedwatching,” reviews proposed indicators, and focuses on the Federal Reserve’s P-Star (P*), an indicator of potential inflation. It defines P* as an eventual implied price level derived from M2, estimated long-run velocity, and potential output, then connects crossings and persistence to inflation and disinflation patterns.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/monetary-indicators-and-the-federal-reserves-p-star/324251/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/monetary-indicators-and-the-federal-reserves-p-star/324251.png","ImageObject",300,407,{"name":92,"@type":93},"Skyler","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-28","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",12,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"What is the purpose of an indicator in Federal Reserve policymaking?","Question",{"text":113,"@type":114},"An indicator is a variable that provides information about whether policy instrument settings are likely to achieve their objectives, which are observed only after a lag.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"How is P* defined and what does it represent?",{"text":118,"@type":114},"P* is the eventual price level implied by the current level of the M2 monetary aggregate. It is calculated as P* = (M2 x V*) / Q*, where V* is an estimate of long-run M2 velocity and Q* is a measure of potential output.",{"name":120,"@type":111,"acceptedAnswer":121},"How do changes in P* relate to inflation or disinflation?",{"text":122,"@type":114},"When P* persistently exceeds the current price level, rising inflation tends to follow; when P* persistently remains below the current price level, disinflation tends to follow. The lag between when series cross and when inflation direction changes can vary.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},324251,1790013322,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145,"preview_page_count":4},2336464648746,"https://ap-avatar.wpscdn.com/davatar_276721f389ce27ea32af1340a28f341c","by John B.Carlson  \nF  \ninancial markets pay a great deal ofattention to the Federal Reserve Systemand,in particular,to the deliberations ofits key policymaking arm,the FederalOpen Market Committee(FOMC).This \"Fedwatching\"focuses largely onanticipating how the FOMC is likely toreact to unfolding events in theeconomy,and how such actions becometranslated into changes in the cost andavailability of money and credit.  \nSpecifically,markets are interested inknowing which variables the FOMCconsiders in assessing whether it is ac-complishing its objectives.These vari-ables are often referred to as indicators.In recent years,Federal Reserve offi-cials have proposed a variety of newmonetary indicators,including com-modity prices,the trade-weighted valueof the dollar,and the yield curve.Mostrecently,however,the Federal Reservehas unveiled P-Star(P*),an indicatorof potential inflation.  \n## ■ What Is an Indicator?\n\nAn indicator is neither an ultimate ob-jective to be achieved(a goal),nor astand-in objective to be aimed at(a tar-get).Rather,an indicator is a variablethat provides information aboutwhether policy instrument settings arelikely to accomplish their specified ob-jectives,which are observed onlyafter a lag.An indicator essentially  \n## The Indicator P-Star:Just What Does It Indicate?\n\nprovides information conceming thecurrent state of the economy.²  \nIf an indicator value is unusually high(or low)on the basis of some historicalstandard,it could indicate that goal ortarget variables are likely to miss theirmarks.A policymaker might thenreconsider policy instrument settings toattempt to avoid undesired outcomes.However,policymakers are under nocommitment to react in any specifiedway to changes in the value of an in-dicator;nor are they committed to seeka specified value.  \nBecause policymakers typicallylook ata variety of indicators,they often ob-serve conflicting signals.Moreover,dif-ferent policymakers give differentweights to different indicators.Thus,itis often difficult to predict how agroupof policymakers willreact to substan-tial changes in indicator values.  \n■ What Is P*?  \nSimply put,P*is the eventual pricelevel implied by the current level of theM2 monetary aggregate.It is calcu-lated as P*=(M2xV*)/Q*,where V*is an estimate of the long-run value ofthe GNPvelocity of M2—the meanvalue from 1955:QI to 1988:Q4—andQ*is a Federal Reserve Board staffmeasure of potential output.Recent ad-vances in understanding long-termstatistical relationships indicate that P*  \nSeptember 15,1989  \nMonetary indicators can helppolicymakers to evaluate the likelysuccess or failure of policy instru-ment settings.The recently unveiledP-Star indicator can be useful as anindicator of potential inflation and,more broadly,asa method of assess-ing the Federal Reserve's long-termgoal of price stability.  \nand the current price level probablyshare a common trend.  \nThe indicator property of P*is re-vealed in figure 1.The vertical dottedlines denote the quarters when the cur-rent price level(implicit price deflator)and P*cross(top panel).Periods afterwhich P*begins to persistently exceedthe current price level are ultimatelycharacterized by rising inflation(bot-tom panel).  \nConversely,periods after which P*begins to persistently remain below thecurrent price level are followed byperiods of disinflation.There is anoteworthy variation,however,in thelag between the time the two seriescross and the point when inflationchanges direction.  \nFIGURE1 P*AS ANINDICATOR OF INFLATION  \nNatural log of price  \na.Inflation is the percentage change in the implicit price deflator from four quarters earlier.NOTE:The ventical lines in the top and bottom panels mark the quarters when P and P+cross.SOURCES:Board of Governors of the Federal Reserve System;and U.S.Department of Commerce,Bureauof Economic Analysis.  \nFIGURE2 M2 VELOCITY  \nSOURCES:Board of Govemors of the Federal Reserve System:;and U.S.Department of Commerce,Bureauof Economic Analysis.  \nPresently,the level o","cbCaioFiMxnL8aAf","https://ap.wps.com/l/cbCaioFiMxnL8aAf","pdf",1029204,"English","# What Is an Indicator?\n# The Indicator P-Star: Just What Does It Indicate?\n# What Is P*?\n# Isn’t This Just the Quantity Theory?\n# Two Key Assumptions","[{\"question\":\"What is the purpose of an indicator in Federal Reserve policymaking?\",\"answer\":\"An indicator is a variable that provides information about whether policy instrument settings are likely to achieve their objectives, which are observed only after a lag.\"},{\"question\":\"How is P* defined and what does it represent?\",\"answer\":\"P* is the eventual price level implied by the current level of the M2 monetary aggregate. It is calculated as P* = (M2 x V*) / Q*, where V* is an estimate of long-run M2 velocity and Q* is a measure of potential output.\"},{\"question\":\"How do changes in P* relate to inflation or disinflation?\",\"answer\":\"When P* persistently exceeds the current price level, rising inflation tends to follow; when P* persistently remains below the current price level, disinflation tends to follow. The lag between when series cross and when inflation direction changes can vary.\"}]","Monetary Indicators and the Federal Reserve’s P-Star | PDF",1789967439,13]