FINANCIAL TIMES: …The Fed forecasts core inflation of 1.5 per cent this year, 1.85 per cent in 2015 and 1.9 per cent in 2016 because it thinks continued unemployment will keep downward pressure on wages. The behaviour of inflation is crucial: if wages and price rises start to accelerate, it will be evidence of lower spare capacity than the Fed thought, forcing it to consider earlier and faster rate rises.
Inflation slumped in the wake of the 2008-09 recession, picked up in 2011, but then started to fall again in 2012. That played a strong role in the Fed’s decision to launch a third, open-ended round of asset purchases, known as QE3, in the autumn of 2012.
Fed officials have started to change their tone on inflation in recent weeks. Whereas earlier in the year they fretted about the slow pace of price rises, they are now at pains to argue that the pick-up in prices will not be too fast… (more)
EDITOR: Statistic after statistic suggests that there has been no real economic recovery over the past three years, only a bonanza for the affluent due to the run up of the stock market caused by extreme monetary policy measures. The Federal Reserve found them necessary because of Republic opposition to an interim fiscal policy of deficit spending.
A higher inflation rate, kept within limits, tends to reduce the real value of national and private debt and serves as a spur to investment. This is what occurred for two decades following World War II.
