New York Fed President John Williams told WSJ that it’s important for Fed to stick to its 2% inflation target. Fed has to make sure inflation expectations don’t slip too far, which will affect actual inflation in the future.
“There’s been a process of going through the stages of grief about a low neutral rate,” he said. “These factors are basically the hand we’ve been dealt for the next five to 10 years.”
He warned “if inflation continues to underrun our target levels like it has, this downward trend in inflation expectations will likely continue with inflation expectations falling well below target levels.”
