Low Inflation Taper Theory

By |2014-04-15T16:50:10-04:00April 15th, 2014|Economy, Federal Reserve/Monetary Policy, Markets|

There was considerable attention given to Janet Yellen’s appeal toward “optimal control” language in prior speeches and toward her confirmation. The idea is such that the newly committed 2% inflation target does not need to be a “rule.” Under optimal control, the FOMC may tolerate an inflation rate above that target if it allowed unemployment to decline at a quicker [...]