The Economist's Free Exchange blog is shocked to hear this from Federal Reserve Bank of Philadelphia President Charles Plosser:
Note that the 10-year forecast has been and continues to be around 2.5%. Based on Plosser's comments above, one would think it might have been inching up lately, but no it more or less has flat-lined since the late 1990s. I wonder what Plosser thinks of this data; how does he reconcile it with his comments above?
"Since expectations play an important role in the dynamics of inflation, it is important that policy act in a manner that keeps expectations well-anchored near the Fed’s inflation objective,” Plosser said in a speech in Rochester. “If expectations do become unanchored, then the Fed will have lost its credibility and either inflation or deflation could arise…So, anticipation and forward-looking policy are essential if the Fed is to achieve its goal of low and stable inflation."I agree with the Free Exchange blog that inflation becoming unanchored is not an issue now. In fact, Plosser's own bank does the Survey of Professional Forecasters which shows the Fed still has an amazing amount of inflation-fighting credibility. Below is a figure based on this data (click on figure to enlarge):
Note that the 10-year forecast has been and continues to be around 2.5%. Based on Plosser's comments above, one would think it might have been inching up lately, but no it more or less has flat-lined since the late 1990s. I wonder what Plosser thinks of this data; how does he reconcile it with his comments above?
0 comments:
Post a Comment