If that is indeed the case, I believe the first action to raise interest rates will in all likelihood be justified by the middle of the year. The phrase “middle of the year” is admittedly not very precise. That’s purposeful on my part. Understandably, some financial market participants are fixated on what exact month the first move will occur.
As early as 1970, William Poole's classical analysis of the instrument-choice problem taught us that using the interest rate as policy instrument is desirable when short-term uncertainty stemming from instability in the money multiplier or from money demand shocks is high relative to the uncertainty stemming from aggregate demand shocks.