The commentary from both Mester and Harker comes less than a day after Powell announced a major policy shift and said the Fed will allow inflation to run hotter than normal to support the recovery of the labor market and broader U.S. economy.
The Fed formally agreed to a policy of "average inflation targeting," meaning it will allow inflation to run "moderately" above the Fed's 2% goal "for some time" following a period of below-average price appreciation. Inflation has undershot the central bank's 2% for most of the time since the financial crisis.
In the 12 months through July, the core PCE price index increased 1.3% after rising 1.1% in June. The core PCE index is the preferred inflation measure for the Fed's 2% target. Asked what level of inflation he'd be comfortable with, Harker explained that he thinks the pace of inflation's rise is more important than the number to which it rises.
I'd be comfortable with inflation "somewhere north of 2%. But to me, it's not so much the number, whether it's 2.5% or 3%," he said. "It's whether it's reaching 2%, creeping up to 2.5% or shooting past 2.5%."Harker said he'd be comfortable with inflation "somewhere north of 2%. But to me, it's not so much the number, whether it's 2.5% or 3%.
Velocity of Inflation like Velocity of Money. What’s the formula for that?