Before doing so, I remind you once again that the views I express are my responsibility alone. As you know, in reaction to gathering economic momentum and an apparent stabilization in inflation, the FOMC at its May 4 meeting characterized the risks to both sustainable growth and inflation as being roughly in balance.
The Committee’s statement ended with the following sentence: “At this juncture, with inflation low and resource use slack, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” As a number of FOMC members have noted in public forums, the federal funds rate’s current setting of 1 percent (which implies a negative real funds rate) cannot be sustained in a growing economy and eventually will have to be normalized.