Comments from Williams
- Must stay vigilante against sustained takeoff of inflation
- Equally vigilant against too-low inflation
- Persistent inflation undershoot may erode 2% anchor
- New inflation dynamics mean Fed can safely 'look through' transitory inflation shocks
- What is changed is that transitory inflation shocks no longer get embedded in expectations
This is an important observation. He argues that central bankers can sleep easy when there is a jump in inflation due to rising energy prices or a falling currency because inflation expectations won't run away. In practice, that's what they were doing before but markets would always get a bit jittery about hikes.
