In this talk, I have suggested that we are only at the beginning of an understanding of some of these relationships. Even if an underlying causal link exists between some real asset prices and liquidity, many additional factors may be influencing what we see, with potential for misleading us in interpreting simple associations or correlations. The problem obviously is complex.
Inflation is expected to return to 2 percent over time, but at a somewhat slower pace than we foresaw earlier in the year. However, the risks to this favorable baseline outlook appear to have grown. Last week, my FOMC colleagues and I held our regular meeting to assess the stance of monetary policy.