Fed Staff Pondered Inflation Puzzle and Came Away None the Wiser
- Special presentation at January meeting found no alternatives
- Results showed inflation expectations may be below 2% target
This article is for subscribers only.
Former Federal Reserve Chair Janet Yellen has called low inflation a bit of a “mystery.” So it was appropriate that at her final Fed meeting, she and her colleagues received a special briefing on what had gone wrong with the computer models they use to forecast price pressures.
The conclusion of the briefing: The models aren’t great for forecasting, but alternative options aren’t obvious either. Perhaps even more troubling for policy makers is that inflation appears to be anchored below the Fed’s 2 percent target.