Fed Officials Confront New Reality: Low Inflation and Low Unemployment


NYT/Binyamin Appelbaumaug/08-16-17

Federal Reserve officials are struggling to make sense of a new economic reality in which low inflation and low unemployment are persisting side by side.

…The timing of the Fed’s next rate move is considerably less certain. The Fed entered the year predicting three rate increases of a quarter-point each; so far it has delivered two, with a third seen possible in December.

But the weakness of inflation, which the Fed now expects to remain below its target annual pace of 2 percent for the fifth-consecutive year, is prompting some Fed officials to hesitate.

…Some Fed officials have suggested that the public is losing confidence that the Fed will raise inflation back to a 2 percent annual pace, which could make it harder for the Fed to do so, because inflation expectations can become self-fulfilling.

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