Inflation Expectations & Policy Shock Simulator

Macro Scenario Presets

Demand & Real Shocks

Aggregate Demand Pressure +1.8%

Consumer spending & fiscal tailwind sustaining positive output gap.

Capital Investment Boom (Capex) +2.4%

Productivity buildout competing for equipment, energy, and labor.

Expectations & Central Bank Rule

Expectation De-Anchoring Weight (λ) 0.45

Share of public basing future inflation on past realized numbers vs Fed target.

Fed Policy Stance (Taylor α_π) 1.50

Hawkishness coefficient: rate response per 1% inflation overshoot above 2%.

Model calibrated to Hammack warning: persistent capex & embedded expectation bias.

Peak Inflation 3.8% Elevated

Terminal Policy Rate 5.25% Restrictive

Embedded Public Expectation 2.8% +80 bps unanchored

Cumulative Sacrifice Ratio 1.4 Moderate Drag

16-Quarter Policy Trajectory (Dynamic Phillips Curve + Taylor Rule)

Realized Inflation (π)

Public Expectations (π^e)

Fed Funds Policy Rate (i)

Real Rate (r = i - π)

Inspect Quarter: Q8 (Year 2, Q4) Hover or drag timeline slider to audit snapshot

          Q1 (Start)
          Q4
          Q8 (Mid-Cycle)
          Q12
          Q16 (Terminal)
        

Beth Hammack Persistent Inflation Dynamic

Solid growth and capex competition prevent the output gap from closing naturally. Because λ = 0.45, public expectations drift up to 2.8%, compelling the Fed to hold real rates above +2.0% longer than anticipated.

View Complete 16-Quarter Numerical Ledger

Quarter	Realized π (%)	Expectations π^e (%)	Output Gap y (%)	Policy Rate i (%)	Real Rate r (%)