2  The confidence interval equals (subject to a lower bound of 12.5 basis points) the median SEP path for the federal funds rate plus or minus average root mean squared prediction errors (RMSPEs) of the three-month Treasury bill rate, for horizons from zero to nine quarters ahead, based on forecast errors made over the past 20 years.
Indeed, history shows that deflation can be just as damaging to the prosperity and stability of our economies as high inflation. To mention just some of the negative impacts, in a low inflation environment firms’ revenues fall but the wages they pay their employees are typically more “sticky”, so the real wages they have to pay rise. That can lead to higher unemployment.