Core prices for personal consumption expenditures advanced at an average annual rate of less than 2 percent over the two years preceding the peak - despite unemployment rates down around 4 percent. Moreover, prices decelerated during the recovery. At this time last year we observed core PCE inflation in the vicinity of 1 percent.
In fact, inflation was so low, especially once known biases in the price indexes are taken into account, that for several months the FOMC was concerned more about the possibility of “inflation becoming undesirably low” than about the risk of a rise in inflation.