Any doubt they would raise rates immediately (through a Conference Call)? However, that was the combination that existed in September 2011 (“9/11”), when QE3 was still to come!
Today both headline and core are far from target, but Yellen is all the time “justifying” the need for a rate increase soon:
“I would not consider it prudent to postpone the onset of normalization until we have reached, or are on the verge of reaching, our inflation objective.”
The “heartbeat” of nominal and real growth has not changed during this time, remaining close to 4% and 2.2%, respectively year on year.
Overall, both measures of inflation have been well below target for most of the time since 2008.
What has changed is unemployment, which has dropped from 9% in September 2011 to 5.5% in February 2015 and is getting “dangerously close” to her latest “estimate” of NAIRU (5% – 5.2%)!
She should remember James Tobin, her thesis adviser at Yale who, on the year she was awarded her PhD, 1971, wrote “Living with Inflation”. Only now she wants to change that a bit and push for “Living without inflation”!
So I find Tony Yates´ “insistence” on raising the inflation target “romantically naïve”!