Welcome to my US Macroeconomic Analysis Portfolio Project! In this project, I conduct a comprehensive analysis of the United States economy during the post-COVID era (2021–2025). Using data directly from the Federal Reserve Economic Data (FRED) API, I examine the intricate relationships between inflation, monetary policy, and labor market resilience.
The focus of this project is to analyze the "immaculate disinflation" and the Federal Reserve's tightening cycle. By examining 25 different macroeconomic indicators, I aim to provide insights into why a recession failed to materialize despite a 26-month yield curve inversion and how structural shifts have impacted the labor market.
- Interactive Power BI Dashboard: A multi-page dashboard visualizing inflation snapshots, Fed policy stance, and labor market recovery.
- Comprehensive Python Notebook: Detailed analysis including SQL queries, OLS regression, and machine learning models.
To ensure high-fidelity analysis, data was pulled directly from the St. Louis Fed FRED API. The dataset includes 25 series across five categories:
- Output & Growth: Real GDP, Industrial Production.
- Labour Market: Unemployment Rate, Nonfarm Payrolls, JOLTS Job Openings.
- Inflation & Prices: CPI, Core CPI, PCE, PPI.
- Monetary Policy: Federal Funds Rate, M2 Money Supply.
- Financial Conditions: 10Y and 2Y Treasury Yields, VIX Volatility Index.
The project utilized Python (Pandas) for data wrangling and SQLite for advanced macro summaries. Key steps included:
- Standardizing 60 months of data (Jan 2021 – Dec 2025).
- Deriving economically meaningful variables like Real Fed Funds Rate and Yield Spreads.
- Handling time-series lags to respect causality in regression models.
EDA was performed to identify structural breaks and trends in the post-pandemic landscape.
- Correlation Analysis: A Pearson Correlation Matrix was used to identify the strongest leads for inflation.
- Labor Market Dynamics: Analysis of the Phillips Curve to estimate the post-COVID NAIRU.
- Monetary Stance: Evaluation of the Taylor Rule to determine if the Fed was "behind the curve".
- ARIMA(0,2,1): Used for 12-month inflation forecasting, achieving a MAPE of 5.97% on hold-out data.
- XGBoost Classifier: Built to assess the probability of high inflation (CPI > 3%) based on 11 leading indicators, including consumer sentiment and yield spreads.
The Taylor Rule Gap: The Fed was approximately 6 percentage points behind the Taylor Rule prescribed rate in 2021–2022.
- Real Rates: The real Fed Funds Rate hit -4.47% in 2022, the most stimulative stance since the 1970s.
- The Inversion Paradox: The yield curve remained inverted for 26 months (July 2022 – August 2024) without a recession materializing.
- Structural Labor Shifts: Post-COVID NAIRU is estimated at 4.41%, higher than the pre-pandemic 4.0%.
The project findings are supported by several key visualizations:
- Macro Landscape: Combined view of CPI, Fed Funds Rate, and Unemployment.
- Policy Stance: Taylor Rule vs. Actual Fed Policy.
- Yield Curve: 10Y vs. 2Y Treasury spread analysis.
- Inflation Forecast: ARIMA model predictions with 95% confidence intervals.
- Sample Size: The post-COVID era provides a relatively short time series (48–60 months) for complex machine learning models like XGBoost, which ideally require larger datasets for high-confidence binary classification.
- Structural Breaks: The unique nature of the pandemic recovery makes historical comparisons (e.g., pre-2020 NAIRU) difficult to apply directly.
Q1. Was the Fed too loose for too long?
Yes, the Taylor Rule analysis shows a significant gap in 2021–2022.
Q2. Is a recession still coming?
Despite the long yield curve inversion, labor resilience and "immaculate disinflation" suggest a soft landing.
Q3. Where is inflation heading?
Models suggest inflation may re-accelerate toward ~3.4% by late 2026 if policy eases prematurely.
- Delayed tightening caused inflation to run deeper than necessary.
- The Fed achieved a rare "soft landing" — halving inflation without a recession.
- Monitor M2 Growth and Real Fed Funds Rate as primary leading indicators for future inflation.
- ©2026 Gaurav Kamble. All rights reserved.
- Tableau Public
- Kaggle