Chart of the day: Low and stable inflation
You can't eat low and stable inflation expectations. Which is a shame.
The Federal Reserve announced today that it would not be starting another round of quantitative easing, due to concerns over inflation. Only two members of the committee thought otherwise, with the minutes recording that:
A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.
The chart above shows the Cleveland Fed's summation of market expectations of inflation rates (for those of a wonkish tendency, the methodology can be found in this PDF). If it makes one thing clear, it is that at no point in the next thirty years does the market expect the long run inflation rate to even hit 2 per cent, let alone rise above it. The Fed may have information the markets don't (in fact, one would hope they do), but for absent that evidence, their protests look remarkably thin.