FINANCIAL TIMES: Even a recovering US economy may not pull inflation back up towards the Federal Reserve’s 2 per cent target, Janet Yellen has said, in remarks that raise the possibility of easy monetary policy for longer than currently expected.
In a speech to the Economic Club of New York on Wednesday, the chairwoman of the Fed said that high levels of unemployment had put less downward pressure on inflation than expected, so higher employment might not pull prices up again…
“The larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained,” she said… (more)
EDITOR: Most mid to long term interest rates were set at a level anticipating a higher level of inflation. Thus lenders have prospered and borrowers have had to pay ‘usurious’ interest rates. This is not good for most of the population nor is it good for economic growth. As some economists have maintained, we need a rate of inflation of at least 2%, as we had after the Second World War when the nation was also overburdened with a huge debt load. Moderate recovery led to early and relatively full employment.
