In particular, in my view, the Federal Open Market Committee has little reason to undertake significant tightening so long as inflation remains low and promises to remain subdued, as it does today. Let me elaborate. In the past, significantly tighter monetary policy often came shortly after the beginning of a cyclical pickup in economic growth.
When Fed policymakers responded that way, they did so as the consequence of living in a regime in which inflation was already above the desired range, and the rapid acceleration of activity threatened to press against capacity and raise inflation still higher. Then the risk to satisfactory economic performance was that inflation would rise too high, and policy was forced to preempt that risk.