The minutes of the December 16-17 Federal Open Market Committee meeting offer some hope that the Fed is finally getting over its seven-plus years’ worry that the U.S. runs the risk of falling into a deflationary spiral, similar to what we encountered during the Great Depression of the 1930s.
While deflation, or even disinflation, might be a legitimate concern now in Japan and the Euro Zone, the idea that we face a similar threat seems a little hard to swallow. Perhaps this was a real concern during the panicky days of the global financial meltdown in 2008, but even then it seemed to be a stretch. Now, seven years later, it just looks ridiculous.
According to the minutes of the December meeting, released last week, the Fed’s monetary policy committee brushed off the idea that inflation would remain below the Fed’s 2% target due to the declining price of oil, which it calls “transitory,” and remaining slack in the labor market. Continue reading "There’s Still Hope for the Fed"