Specifically, it stated that near-zero rates would likely remain appropriate for a considerable time after the asset purchase program ends and “at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored”.16 It deserves emphasis that a 6-1/2 percent unemployment rate and inflation one to two years ahead that is 1/2 percentage point above the Committee’s 2 percent objective are thresholds for possible action, not triggers that will necessarily prompt an immediate increase in the FOMC’s target rate.
Such a constellation suggests that we may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below but close to 2% later on. Taking into account today’s decisions, the risks to the outlook for price developments are broadly balanced over the medium term.