Economic Indicators
The key data points the Federal Reserve monitors when making policy decisions. Understanding these helps you interpret Fed actions.
Data-Dependent Decision Making
Gross Domestic Product (GDP)
What is it?
The total monetary value of all finished goods and services produced within a country's borders in a specific time period.
Why does the Fed care?
GDP is the broadest measure of economic activity. The Fed watches GDP growth to gauge the health of the economy. Strong GDP growth may lead the Fed to tighten policy to prevent overheating; weak GDP may prompt easing.
Key Points
- Reported quarterly by the Bureau of Economic Analysis (BEA)
- Real GDP adjusts for inflation; nominal GDP does not
- Two consecutive quarters of negative real GDP growth is commonly (though not officially) called a recession
- The Fed targets sustainable long-run GDP growth, often estimated around 1.8–2.0% annually
The Phillips Curve Trade-Off
The Phillips Curve is an economic concept that suggests an inverse relationship between unemployment and inflation. When unemployment is low, inflation tends to rise (as workers demand higher wages), and vice versa.
This relationship is central to the Fed's challenge: pursuing maximum employment can push inflation higher, while fighting inflation can increase unemployment. The Fed must navigate this trade-off carefully.
Modern economists note that this relationship has weakened in recent decades, making the Fed's job more complex. Factors like globalization, technology, and changing inflation expectations have altered the traditional dynamics.
Key Data Releases the Fed Watches
This Week — Apr 13–18, 2026
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