As the chairman of the Federal Reserve Board’s community and regional bank subcommittee, I try to meet with groups of community bankers whenever I can to better understand what is on community bankers’ minds.
The link between output and inflation is determined by three main factors: external shocks to prices; the size of the output gap and its impact on inflation; and the extent to which current inflation feeds into price and wage setting. In different ways, each of these factors has been relevant for the delayed reaction of inflation to the recovery.