Powell gave a speech: “Remarks on Monetary Policy”:
The Committee said that it will want to be reasonably confident that inflation will move back to 2 percent over the medium term. On a 12-month basis, headline inflation in February, as measured by the personal consumption expenditures price index, stood at 0.3 percent; meanwhile, core inflation, which excludes volatile energy and food components, was 1.4 percent. These low current readings are partly a consequence of two transient shocks–the dramatic decline in oil prices and the effect of the appreciation of the dollar on import prices. Before those shocks, both headline inflation and core inflation were running at about 1.5 percent. When the effects of these shocks pass, I expect that inflation will return roughly to those earlier levels and then rise gradually to our 2 percent objective over the medium term as labor and product markets tighten further.
He´s an “expert” because:
1 He believes (as most in the FOMC) that interest rates are a pretty good indicator of monetary policy)
2 He believes (as most in the FOMC) that inflation is a “price phenomenon” (i.e. likes to reason from a price change)
3 He believes (as most in the FOMC) that there are “long and variable lags” in the effect of monetary policy
As the chart shows, from the “get go” on the 2% inflation target in January 2012, inflation has been mostly falling below the target, It was around 1.5% in mid-2014, just before the oil price fall and dollar appreciation. But it was also 1.5% 18 months before that, in early 2013.
If he paid attention to better indicators of the stance of monetary policy (like NGDP growth and (less precisely) core inflation) he would have difficulty believing that inflation will “turn up”.
Powell also brings up the effects of financial crisis:
All else equal, a decision to return interest rates to more-normal levels implies that the economy is nearing its capacity. The financial crisis did significant damage to the productive capacity of our economy, and the damage was of a character, extent, and duration that cannot be fully known today…
Let us take a brief look at the implications of severe financial crises for economies generally. Studies document that severe financial crises around the world have typically left behind large and sustained reductions in the level of output.5 The recent crisis is no exception, and figure 1 shows such an effect for the U.S., U.K., euro-area and Canadian economies since 2008. The underlying pattern is an interesting one. Economists and policymakers have tended at first to view a decline in output as a cyclical shock to demand and to realize only gradually over time that a crisis has done substantial and lasting damage to the productive capacity of the economy.
The charts in the link to his figure 1 refer to real GDP (RGDP). If he were smart, he would have checked that pattern against the (monetary policy induced) nominal GDP (NGDP) pattern. He would have found that for those countries the NGDP pattern is the same, all having let NGDP drop significantly below trend.
If he really wanted to get to the bottom of the issue, he would have tried to find out how the crisis evolved regarding countries, like Australia, Israel and Poland, which did not let NGDP fall below trend. “Miraculously”, those countries did not experience a recession (fall in RGDP).
If he did all that, he would have to conclude that the “substantial and lasting damage to the productive capacity of the economy” rests heavily on the shoulders of the Fed and its misguided monetary policy!
That, however, will never happen. As Bernanke has indicated in the title to his forthcoming book, as the “leader of the pack” he had the “Courage to Act”!