Wow! Yellin confirms 2% inflation is the Fed’s ceiling

Wow! Yellin confirms 2% inflation is the Fed’s ceiling

You may have already seen this elsewhere, but in case you didn’t, Janet Yellin all but officially confirmed the other day that 2% isn’t in fact the Fed’s target, it’s their ceiling. Per the New York Times:

Given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Ms. Yellen told the National Association for Business Economics .

Let me just remind you one more time that in the past 50 years, during recessions the inflation rate has typically fallen by more than 2%.   That means that if the Fed is “successful,” the next recession will tip over into outright deflation, including deflation in even nominal wages.

Now imagine a wage-price deflationary spiral beginning with Donald Trump as president and the GOP in control of both houses of Congress.

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