So, whether we look over the past six years or over the past two years, inflation has been running too low to be consistent with price stability. The good news is that the FOMC does expect inflation to turn back toward 2 percent. However, I expect that return to 2 percent to take a long time – possibly on the order of four years.
And I’m not the only one forecasting a slow return to 2 percent inflation. Earlier this year, the Congressional Budget Office (CBO) predicted that inflation will not reach 2 percent until 2018. To sum up: The FOMC is undershooting its price stability goal.