Forward guidance issued by the Federal Reserve assumes that longer-term inflation expectations have been anchored at around 2 percent. However, there may be some limited concerns on the dis-anchoring of inflation expectations. Therefore, one of the main tasks for the Federal Reserve is to continue with monetary easing measures to seek economic improvement, while ensuring that the anchored inflation expectations are maintained.
Understanding and managing the elements of this interdependence is key to improving the situation with regard to the cost and availability of credit, matters that are of central interest to my hosts tonight, the Small Firms Association.