Year-over-year changes in headline personal consumption expenditures (PCE) prices have been running only a little above zero, and core inflation is at about 1-1/4 percent.
But for reasons discussed at length in Janet Yellen’s recent speech at the University of Massachusetts, Amherst, as long as inflation expectations remain well anchored, inflation is likely to move back toward 2 percent as the transitory effects of oil prices and the dollar fade, and as the economic expansion continues. What about monetary policy?