First, to have reasonable confidence that inflation will be on track to reach its target of 2 percent over the medium term, I will be looking closely at a variety of indicators – in particular, signs that core inflation is firming, deflationary pressures from abroad are abating, and both survey- and market-based measures of inflation expectations are stable.
Despite the deflationary pressures from abroad, the recent data have provided some reassurance that inflation in the United States is starting to firm. Oil prices have now retraced part of their decline from the middle of last year through January, and monthly changes in core personal consumption expenditures (PCE) prices have increased from the very low levels reached around the turn of the year.