Economics
Champion of Key Fed Inflation Gauge Says Policy Shift Is Needed
- 5-year, 5-year forward rate is now consistent with Fed goal
- Former Fed official Sack says further climb would be problem
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The economist who helped change the way the Federal Reserve assesses long-run inflation expectations says their current level means the central bank needs to start laying the groundwork for shrinking its massive bond-buying program.
As head of monetary and financial market analysis at the Fed Board of Governors almost two decades ago, Brian Sack worked with his colleagues to champion the use of a forward measure of inflation expectations to help guide policy. Now director of global economics at hedge fund D.E. Shaw & Co., he says the so-called five-year, five-year forward breakeven inflation rate has climbed to a level where further increases would be problematic for the central bank.