Expected inflation, as measured by financial markets, has fallen sharply since last summer in both the eurozone and the U.S. The response of their central banks couldn’t be more different. The European Central Bank reacted with alarm and soon decided to launch quantitative easing. By contrast, the Federal Reserve has shown a puzzling insouciance.
Back in 2008, as attested by the Meetings Transcripts, quite the opposite was happening!
Because we have the likes of John Williams, SF Fed president saying inane things like: “Door Open for Interest-Rate Increases Starting in June”
NEW YORK–Federal Reserve Bank of San Francisco President John Williams said the door is open to central bank interest rate increases any time from mid-June onward.
In an interview with The Wall Street Journal, Mr. Williams expressed a good deal of confidence in the U.S. outlook, especially on hiring. He said the jobless rate could fall to 5% by the end of the year, which means the central bank is getting closer to boosting its benchmark short-term interest rate from near zero, where it has been since the end of 2008.
“We are coming at this from a position of strength,” Mr. Williams said. “As we collect more data through this spring, as we get to June or later, I think in my own view we’ll be coming closer to saying there are a constellation of factors in place” to make a call on rate increases, he said.
An inflation target no more!