The past week has seen some interesting statements from both the Bank of England and the US Federal Reserve on inflation expectations and their respective near term targets. Statements from both the BoE’s Mark Carney and the Fed’s Janet Yellen seemed to suggest that both central banks were prepared to let the economy run “hot” in the near term.
In particular, Janet Yellen’s statement was relatively curious given the fact that rate hikes are supposedly on the table for the FOMC in the near term. Subsequently, it seems almost counter intuitive that the central bank would wish to use the expectations channel to stoke the inflationary fires. Given that central bankers typically don’t scratch and itch without a game plane in place you would be forgiven for wondering just what Yellen and the FOMC have in mind for the coming months.
Source: Investing.com (18 October 2016)