It's not about the pace, it's about the direction we've set. The pace is of course a function of many factors, including the magnitude of the supply shock. But what's probably more important is the probability of the supply shock translating into sustainable embedded inflation.
Monetary policy will, as always, respond to the economy's twists and turns so as to promote, as best as we can in an uncertain economic environment, the employment and inflation goals.
We will not play with inflation. We are living a delicate moment. President Obama spoke to me today about the high unemployment affecting the United States. In this crisis period, when the developed nations are not recovering, it's prudent to maintain the established inflation target.
Food and energy account for a significant portion of household budgets, so the Federal Reserve's inflation objective is defined in terms of the overall change in consumer prices.
The government will always tell you that it wants low inflation. The real issue is the horizon over which to bring inflation down.
The only way to ensure that inflation expectations remain safely anchored near the FOMC's target is to keep inflation close to that target on a consistent basis.
I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability.
At the end of the day, inflation has been below 2% for quite a long time, and to me, symmetry means getting somewhere above 2% inflation at some point in my Fed career.
We have been mandated by the government, backed by legislation, that we have to have an inflation target of about 4%.
I hope that more Canadians will become interested in in how the inflation rate target affects our purchasing power, our standard of living and therefore our life.
The success of monetary policy should be judged by the economy's performance against our statutory mandates of price stability and maximum employment.
It was gradually learned that acceptance of a somewhat higher inflation rate would not really bring somewhat higher employment.
Yes, 4% is the government-mandated target to the MPC. The plus/minus 2 percentage-point upper and lower bands are the tolerance levels specified by the government. If we breach those for three consecutive quarters, we need to inform the government of why that happened and what we propose to do to bring inflation within the two bands.
Growth is always there in the MPC's scheme of things; we don't lose sight of that, but not at the cost of inflation.
If we were to underrun our inflation objective over a period of time that we tried to increase interest rates, I think that would be worrisome.
There will not be an automatic increase in interest rate when unemployment hits 6.5%.
Bernanke and company are trying to reflate the economy with almost stated objective of inflation at 2 percent and higher in order to provide some type of safety margin for a future recession. That's where they want to go.
For risk management reasons, we need to make sure we hit our inflation objective at the same time we're at full employment.
It's a challenge for monetary policy to communicate that our inflation objective is 2 percent.
