My view is that we should further study how PLT frameworks might work in practice. 15 But, it is possible that a simpler approach of committing to keeping the average inflation rate around 2 percent over the medium term might be just as appealing. It might be sufficient to better anchor inflation expectations while avoiding the communication challenges and complexity of an asymmetric PLT regime. In this vein, I also would evaluate whether the inflation goal should be recast as a range of, perhaps, 1½ to 2½ percent, from the current 2 percent objective. A range might have several advantages over a point target. First, it might be viewed as more realistic given that measured inflation will always randomly fluctuate relative to its underlying trend. That is to say, even if the FOMC performs its job exceedingly well, very rarely will the inflation rate, as measured by the PCE price index, be precisely at 2 percent. Second, having a relatively narrow range would send a message that the FOMC is discriminating between two regimes—one in which inflation is within the range and concerns about inflation are low, versus another in which inflation is outside the range and concerns about inflation are more elevated. Even so, I would not recommend shifting to such a range currently. I would only consider doing so once the FOMC has successfully and sustainably pushed inflation back to its 2 percent objective.
In this context, I would not take much signal from the slowdown in consumer spending in the first two months of this year. As I see it, this slowdown was mostly due to two transitory factors: a retrenchment following the spurt in activity from recovery efforts following Hurricanes Harvey, Irma, and Maria, and the delay in this year’s tax refund payments to those receiving certain tax credits.2 Strong payroll employment gains also suggest that the slowdown in household spending will be temporary. Over the last three months, payroll gains have climbed to a monthly pace of 202,000 jobs, somewhat above 2017’s monthly average of 182,000. Robust job gains coupled with moderate growth in labor compensation should ensure that household incomes will continue to rise at a solid rate, even before factoring in the impact of this year’s reduction in personal income taxes. With respect to inflation, most of the evidence is consistent with a slow movement toward the FOMC’s 2 percent objective. On a year-over-year basis through February, the overall Personal Consumption Expenditures (PCE) price index and the core PCE price index—which excludes the more volatile food and energy components—have risen by 1.8 percent and 1.6 percent, respectively, from troughs of 1.4 percent and 1.3 percent last summer. Further gains appear likely at the end of this month, when the sharp decline in cellular telephone services prices that occurred a year ago drops out of the year-over-year calculations. In the current environment, I see three important issues regarding the appropriate monetary policy stance: 1.