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This edition was written by Elijah Asdourian, Alex Conner, Georgia Nabors, Comfort Oshagbemi, and David Wessel.
Policymakers often advocate price transparency as a way to reduce health care costs. Kayleigh Barnes of the Federal Reserve Board and co-authors conduct an experiment randomly providing specific provider price information for certain medical procedures and geographic areas on a healthcare website. They find that pricing transparency produced a 0.75% increase in billed charges. This price increase was concentrated among initially low-priced providers, likely because the transparency tool improves provider information on competitor pricing. There was no impact on the quantity of services provided and minimal impact on consumer price shopping behavior. The authors argue that transparency may allow tacit collusion among providers who learn they are under-charging compared to competitors.
Using data on 47 million mortgage escrow payments from 2014 to 2023, Benjamin Keys of the University of Pennsylvania and Philip Mulder of the University of Wisconsin find that average premiums increased from $1,900 in 2014 to over $2,500 in 2023, a 13% real increase. The authors also find that places with elevated climate risk have seen larger increases in premiums, largely because of increases in the price of reinsurance—the insurance that insurance companies buy to cover extraordinary losses. Reinsurance has become much more expensive since 2018 as climate risk has become more salient, and insurance companies have passed on these increases to homeowners. A one-standard deviation increase in disaster risk used to cost homeowners an extra $300 annually. Now, it costs $500, and the authors predict this will increase to $700 by 2053.
"I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out," says Alberto Musalem, President of the St. Louis Federal Reserve.
"I am also attentive to alternative scenarios where inflation becomes stuck meaningfully above 2 percent or moves higher. As discussed earlier, I believe that robust policymaking requires considering, and communicating about, less likely but consequential scenarios. Should evidence of alternative inflation scenarios begin to materialize, I would support an additional firming of monetary policy. To be clear, I do not view the inflation “getting stuck” or “rising” as the most likely scenarios. But it is prudent to plan for and communicate about plausible scenarios that could play out. If progress toward achieving 2 percent inflation stalls or reverses, I believe it would be appropriate for the Committee to act promptly to ensure that high inflation does not become entrenched."
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