Fed Speak Says Watch Inflation Expectations

Chicago Fed president Michael Moskow says to keep an eye on inflation expectations in a speech given today on the U.S. economic outlook:

Moskow Says Faster Inflation Outlook Would Boost Rate, Bloomberg: A rise in expected inflation ... would require further increases in the Federal Reserve's main interest rate, said Michael Moskow, president of the Chicago Fed. "The next policy decision is much less certain now than it was" ... If measures of inflation expectations "were to rise persistently, then policy would clearly have to be tightened further." ...

St. Louis Fed President William Poole also warned of inflation risks today should the economy grow too rapidly, according to a report by Reuters. ...

Here's the Reuters report on Poole's remarks:

Interview-Stronger data may mean more rate hikes-Fed's Poole, Reuters: The U.S. economy has a "great deal of momentum" and the Federal Reserve may have to raise interest rates further. ... St. Louis Federal Reserve President William Poole ... said he thought the Fed was already close to neutral. But he favored overstepping this mark and making monetary policy restrictive, if there was any doubt, rather than risk letting inflation get out of hand. "If the inflation rate rises in a sustained fashion and particularly if inflationary expectations start to develop, that is a harder process to reverse. ... "I think that if it turns out that policy-tightening has overshot the mark, then we ease off." ...

William Polley has more.

Comments

[me]

My expectation is that everything I seem to buy is higher. To match my expectations they better raise a lot more becuase I don't believe their hedonic crap.

[Sestina]

Dr Thoma, There's an article about japanese deflation on bloomberg.com today that you might be interested in. Unusual take. I've never heard anyone argue that Japan hasn't had enough deflation before:

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=aeNFUFKMHlVs

[Mark Thoma]

Thank you Sestina.