Skip to content
Subscriber Only
Narayana Kocherlakota

The Fed's Hidden Message

Officials are strangely OK with low inflation.
Are you getting that?

Are you getting that?

Photograph: Fox Photos/Getty Images

The U.S. Federal Reserve's latest economic projections contain an encoded message crucial to understanding the central bank's policies: Inflation has been stuck below the Fed's target in part because officials don’t actually want to get it back up.

It's important to recognize that the Summary of Economic Projections, released four times a year, does not consist of forecasts about the real world. Instead, each member of the policy-making Federal Open Market Committee is asked to pretend that he or she has complete control of monetary policy. Under this assumption, they submit their baseline assessments of how the economy will develop.