##lator ( pce ) - - try valiantly to deal with these quality - change biases. but the weight of professional opinion is that, even after years of trying to make corrections, the indexes are still biased upward. since no ready methods exist for correcting some of these biases, it seems appropriate simply to adjust for them. it is generally agreed that the biases are about 1 percentage point per year for the cpi and about 1 / 2 percentage point per year for the pce deflator ( lebow and rudd, 2003 ). whichever inflation target one uses, there is again a measurement argument for steering away from mathematical zero and toward a measured rate of inflation of from 1 / 2 point to 1 point per year above the desired economic cushion. a final argument for steering away from mathematical zero invokes popular preferences, always an elusive topic. when economists have asked people whether inflation is harmful and whether controlling it should be a high priority for government, overwhelming percentages of the population agree. but when people are probed further, their main reason for disliking inflation appears to be the perception that it hurts their standard of living ( shiller, 1997 ). popular opinion seems to view personal wage increases as given - - that is, not related to inflation - - and focuses only on price increases, in which case inflation does look like a destroyer of real income. to economists, on the other hand, inflation should be interpreted to mean a general rise in all wages and prices ; and the costs of general inflation are the " shoe leather " - type costs of managing cash balances, which the respondents to shiller's survey viewed as trivial. hence while inflation is clearly unpopular with the general public, it is not clear that the public is properly identifying the true costs of inflation when making its judgment. a potentially more appropriate way to ascertain the true degree of inflation was suggested by richard ruggles of yale university. i learned about this test in graduate school many years ago, and ruggles may have made his suggestion many years before that. what inflation rates should really measure is the decline in the utility value of a nation's currency. in principle the right test is to offer a sample of the population a constant amount of currency, say $ 1, 000, along with the opportunity to spend it on a menu of all goods and services available this year or a menu of all goods and services available a while back, say five years ago. if

lael brainard : " fed listens " in richmond - how does monetary policy affect your community? speech by ms lael brainard, member of the board of governors of the federal reserve system, at the federal reserve bank of richmond, richmond community listening session, richmond, virginia, 8 may 2019. * * * it is good to be here in richmond today. 1 i appreciate my colleague, tom barkin, leading this event, and it is a pleasure to also be with sherrie brach armstrong, ceo of the community foundation for a greater richmond ; tim davey, timmons group economic development manager ; shawn smith, director of workforce development at goodwill of central and coastal virginia ; and robert ukrop, chairman and ceo of ukrop ’ s homestyle foods. today ’ s community listening session is part of a series called “ fed listens. ” the federal reserve is undertaking a review to make sure we are carrying out the monetary policy goals assigned to us by the congress in the most effective way we can. 2 in conducting this review, we are reaching out to communities around the country in sessions like this to understand how you are experiencing the economy day to day. two goals so what are the monetary policy goals the congress assigned us? congress has assigned the federal reserve to use monetary policy to achieve maximum employment and price stability. these two goals are what we refer to as our dual mandate. by price stability we mean moderate and stable inflation. specifically, the federal open market committee ( fomc ) — the group at the fed responsible for determining monetary policy — has announced that our goal is to keep inflation around 2 percent over time. the maximum employment part of our dual mandate is straightforward : the congress has directed us to achieve the highest level of employment — and thus the lowest level of unemployment — that is consistent with price stability. while the congress has specified the goals for monetary policy and a set of tools or authorities to pursue them, it has allowed the fomc to determine how to best go about achieving those goals. reviewing how we conduct monetary policy last year, core inflation was very close to our goal. and the unemployment rate is at a 50 - year low. we are undertaking our review to ensure we are well positioned to meet our goals for many years to come. we also want to make sure that the way we are setting monetary policy is keeping up with the way the economy is changing, which i have been referring to as the “ new normal. " 3 there