For a politically correct central bank it is acceptable that inflation runs, and is expected to continue running below the target level. From January 2012 to June 2013, the post FOMC meeting statements read:
The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate. (Jan 12)
The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate. (March 12) (That´s a welcome change from the first half of 2008, when they felt that higher oil prices could ‘contaminate’ inflation expectations)
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. (Dec 12) (The ‘dual mandate’ language was dropped. Now it´s only about inflation)
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. (Jan 13)
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. (June 13)
But in July 2013 they apparently realized that if they continued to anticipate that inflation would run below the mark that´s exactly what would continue to happen. So they ‘changed the tune’ to:
The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.(July 13).
The last is a bit better, but not very convincing. They could have skipped the “could” and not just “anticipate”, but that they would take the measures necessary to reach the target.
So how has inflation, both headline and core measures of their preferred inflation indicator, been behaving? Just as 19 months ago they ‘anticipated’! Even worse, the PCE inflation measures are not only below target but trending further south!