In Yellen´s Congressional appearence there were the wishful-thinking homilies:
“With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already underway, putting the overall economy on track for solid growth in the current quarter,” Ms. Yellen told the Joint Economic Committee.
Should you believe her? I don´t. The charts show that after rebounding from the deep crash in aggregate nominal spending (NGDP), the Fed has “calibrated” spending growth at 4% since the end of 2010, no matter your favorite “metric” of growth. With that the growth rate of real output has settled down to an average growth of 2.2%, also in all metrics.
But the interesting thing was that during an exchange with Representative Richard Hanna she:
[S]trongly defended the Fed’s commitment to control inflation. She said the high inflation of the 1970s had been a formative experience for the entirety of the Fed’s leadership, and they were determined to keep inflation below the 2 percent annual pace the Fed has described as its target.
So, ignore the talk about ‘flexible inflation targeting’, ‘2% over the medium term’ or what have you. 2% is a ceiling!
As the chart shows, in that the Fed has been 100% successful! And notice the “learning process” that took place since 2007-08 when oil price increases were perceived as “extremely dangerous”.
PS “Formative experience” indeed!