In any event, we observe a wide range for the predicted funds rate paths as in the first experiment. The weakest forecast anticipates a funds rate of nearly 1 percent by the end of 2015, while the strongest forecast envisions a funds rate of about 4.7 percent in part because both inflation and unemployment “overshoot” their long-run and sustainable values and corrections must follow.
In other words, we cannot say what the appropriate growth of household consumption spending should be, as it would need to be seen in the context of the behaviour of the other factors that determine the inflation rate. Monetary policy-making is not a simple matter of adjusting an interest rate lever in an automatic way.