As I wrote in today’s paper it is the outlook for inflation, not growth, that is going to be most difficult for the Fed to judge as it ponders policy post-QE2. In that regard it’s fascinating to watch the dormant debate on core versus headline flare up again.
Jeffrey Lacker – Richmond
Mr Lacker cited both current and forecast headline inflation in his speech with no mention of core.
This generally positive assessment is complemented by the benign outlook for inflation. Over the 12 months ending in December, the price index for personal consumption expenditure has risen 1.2 percent. This low inflation rate seems more consistent with our price stability mandate than the figures over 2 percent that were common in the years leading up to this recession. Many forecasters are expecting inflation this year to come in between 1-½ and 2 percent. That is my expectation as well, and would represent a good outcome.