Yellen Learns that Targets Matter

Janet Yellen isn’t likely to change monetary policy because of transitory influences on prices coming from abroad. She’s also not inclined to tolerate a long period of above-target inflation as a way of making up for years of little change in living costs.

Those are among the insights the Fed chair offered investors at her press conference this week.

For Yellen, these issues are now critical. Inflation has been below the Fed’s 2 percent target for 30 months and, with a 45 percent decline in oil prices this year, will remain below it for several more months. Fed officials are wary of inflation remaining too low because it can become a drag on growth.

Bloomberg

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