The Mystery of Missing Inflation Weighs on Fed Rate Move (Original article)
by Josh Zumbrun -- Wall Street Journal
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by Josh Zumbrun -- Wall Street Journal
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U.S. near full employment, but inflation hasn’t risen as predicted; Fed officials can’t figure out why
Fed Chair Janet Yellen, in a speech at the University of Massachusetts Amherst in September,
acknowledged ‘significant uncertainty’ about her prediction that inflation would rise.
PHOTO: SCOTT EISEN/BLOOMBERG NEWS
acknowledged ‘significant uncertainty’ about her prediction that inflation would rise.
PHOTO: SCOTT EISEN/BLOOMBERG NEWS
Federal Reserve officials this week are expected to raise interest rates for the first time in nine years on the expectation that employment and inflation will hit targets reflecting a healthy U.S. economy.
But Fed officials face a troubling question: Jobs are on track, but inflation isn’t behaving as predicted and they don’t know why. Unemployment has fallen to 5%, a figure close to estimates of full employment, while inflation remains stuck at less than 1%, well below the Fed’s 2% target.