by Calculated Risk on 11/24/2021 02:11:00 PM
From the Fed: FOMC Minutes, Minutes of the Federal Open Market Committee, November 2-3, 2021. Excerpt on inflation:
In their comments on inflation expectations, a number of participants discussed the risk that, in light of recent elevated levels of inflation, the public’s longer-term expectations of inflation might increase to a level above that consistent with the Committee’s longer-run inflation objective; such a development could make it harder for the Committee to achieve 2 percent inflation over the longer run. A couple of participants pointed to increases in survey- and market-based indicators of expected inflation–including the notable rise in the five-year TIPS-based measure of inflation compensation–as possible signs that inflation expectations were becoming less well anchored. Several other participants, however, remarked that measures of near- and medium-term inflation expectations typically had been sensitive to movements in realized inflation and that they had not exhibited greater sensitivity recently. They additionally pointed out that indicators of longer-term inflation expectations–including the five-year, five-year-forward measure of inflation compensation–continued to display less sensitivity to realized inflation and remained well anchored at levels consistent with the Committee’s longer-run 2 percent goal.
Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives. At the same time, because of the continuing considerable uncertainty about developments in supply chains, production logistics, and the course of the virus, a number of participants stressed that a patient attitude toward incoming data remained appropriate to allow for careful evaluation of evolving supply chain developments and their implications for the labor market and inflation. That said, participants noted that the Committee would not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives.