Donald Kohn, Greenspan´s Vice-Chair has a long and boring bromide which he titled: “U.S. Monetary Policy: Moving Toward the Exit in an Interconnected Global”
Just a few quotes:
Prospects going forward are even better. The decline in energy prices is adding to the disposable income of households.
Many of those forecasting U.S. growth have revised up their projections; the IMF for example increased its projection of U.S. growth for 2015 to 3-1/2 percent with growth dropping back only to 3-1/4 percent in 2016.
It’s this prospect that has the Federal Reserve and most observers anticipating that it will begin to raise rates sometime this year.
What’s holding them back? Why hasn’t the Fed already begun increasing rates in light of this outlook? In a word, inflation, including questions about whether and how fast it will rise in the U.S., even if growth remains above potential.
Instead, the focus will be on underlying inflation rates likely to emerge when the adjustment to energy prices and the dollar are finished. And in that regard there are signs that underlying inflation rates have not been moving toward the two percent target, certainly not as quickly as might be expected given the approach of the unemployment rate and capacity utilization toward levels that in the past had been associated with reasonably full employment.
Either I´m blind or he´s on met. Since the day Bernanke announced the 2% target, inflation has completely “ignored IT”. Kohn´s sentence on underlying inflation is a telltale sign that he´s on “something”. He says that there are signs that underlying inflation rates have not been moving towards 2%, but then indicates that it´s not moving quickly enough. What he really meant was that underlying inflation rates have been moving towards 2% (but not quickly enough).
When he looked at the data he saw the truth, but just couldn´t accept it. The result was a garbled sentence!