Earlier in my speech, I set forth what I see as a key trade-off involved in the making of monetary policy. There is a benefit to adding monetary accommodation: It reduces unemployment. There is a cost to adding monetary accommodation: It increases the risk of inflation running above the Committee’s objective of 2 percent for multiple years.
The FOMC’s actions in 2011 suggest that the Committee is now more concerned about high unemployment, and correspondingly less concerned about the possibility of higher-than-target inflation. Just to be clear: I view the Committee’s current resolution of the trade-off between inflation and unemployment as being justifiable. I also viewed the Committee’s resolution of this trade-off in 2009 as being justifiable.