New York Fed research head: the Fed lets pumpkin prices move, not fertilizer shocks spread
Victoria Shinder2 min readThe New York Fed's director of research, Kartik B. Athreya, used the bank's Liberty Street Economics blog on 9 October to set out, in plain terms, how the Federal Reserve thinks about prices it cannot control. The post is a short essay rather than new research, but it is a clear statement of reasoning from a senior Fed official.
The starting point. Inflation is a budget-weighted average of price changes across everything households buy; the Fed's preferred gauge, the PCE index, covers more than 300 categories. Athreya quotes Chairman Warsh at the September press conference: the Fed "cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store." The Fed's job, he writes, is narrower: to keep the typical change in prices small from month to month and year to year.
Two kinds of shock. Athreya uses two examples:
- Pumpkins. If demand for one small item spikes, its price has to rise or shelves empty. Because it is a tiny share of budgets, overall inflation barely moves, and other prices may move the other way. The Fed's answer to such shocks, in his words, is that "it doesn't have to" respond.
- Fertilizer. A shock that pushes up costs for all food — around 10% of the typical household budget — cannot be expected to wash out. Unless the Fed acted very strongly, at the cost of higher unemployment, inflation would be at least temporarily higher.
What the Fed actually does about the second kind. The aim is not to stop fertilizer users from raising prices but to make sure that sellers unaffected by the shock do not treat a temporary, narrow rise as the start of a general one. If people expect overall inflation to stay low, the affected sectors can adjust their prices while the rest of the economy does not follow. The mechanism Athreya names is two-part: being clear about the goal, and following through by setting the short-term interest rate at an appropriate level relative to the neutral rate.
Why it is worth reading now. The essay does not mention current data or forecast policy. Its framework is simple to apply to any new shock: ask how large a share of budgets it touches, and whether unaffected sellers start to follow. It also lists the New York Fed's own tools for tracking that risk: the Survey of Consumer Expectations, regional business price indexes, the Multivariate Core Trend model of persistence in 17 core PCE sectors, Outlook-at-Risk for CPI uncertainty and the Global Supply Chain Pressure Index.
Source: Federal Reserve Bank of New York, Liberty Street Economics, Prices, Prices, Prices: Overall Inflation and the Costs You Care About, 9 October 2026 — https://libertystreeteconomics.newyorkfed.org/2026/10/prices-prices-prices-overall-inflation-and-the-costs-you-care-about/