SOMEWHAT surprisingly, inflation has been picking up in America in recent months. Not in any worrying way; indeed, the Fed's preferred gauge of inflation, the price index for personal consumption expenditures, remains below the 2% target, as it has done for most of the last four years. But the move upward since late 2015 is unmistakable, and amid what looks like the end (for now, at least) of a long boom for the dollar and a long bust for oil prices, a rise in inflation to and above 2% seems increasingly likely. Above-target inflation is an opportunity for the Fed. It's not clear the central bank is prepared to seize it, however.
At the press conference after the March meeting, Janet Yellen, the Fed's chair, was asked how the committee would deal with higher inflation. The response was not excessively clear:
So, I want to make clear that our inflation objective is 2 percent and we're projecting a move back to 2 percent, and we are not trying to engineer an overshoot of inflation, not to compensate for past undershoots, so 2 percent is...Continue reading
Source: Business and finance http://ift.tt/1RnkNG3
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