Inflation Has Moderated, the Fed Stands Ready

Inflation has started to moderate, Ben Bernanke tells the JEC.

He pointed to a market measure showing that inflation expectations have come down, signaling investors expect more economic weakness ahead.

That is putting it mildly. According to the Cleveland Fed, 10-year expected inflation has fallen to 1.37%. In ordinary times, the Fed aims to keep inflation between 2% and 2.5%. Even if you are excessively cautious, and believe that a spell of higher-than-target inflation is never a good idea, expected inflation is now too low and needs to be increased. Bernanke says the Fed stands ready to act. I keep wondering, what is it waiting for?

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