Yellen Says Inflation Shortfall This Year Is a 'Mystery'

The transcript discusses the reasons behind the inflation shortfall below the 2% target, citing factors like labor market slack, energy price reductions, and dollar appreciation. It highlights the current mystery of inflation shortfall despite these factors not being present. The committee's projections suggest inflation will rise to the 2% target due to transitory factors. The transcript emphasizes the need for potential monetary policy adjustments if inflation remains low and warns against economic overheating, which could necessitate rapid policy tightening and risk recession.

What were some of the reasons for the inflation shortfall from the 2% objective in previous years?

• Rising import prices

• High consumer demand

• Slack in the labor market and energy price reductions

• Increased government spending

What does the committee anticipate about core and headline inflation for the next year?

• They will remain below 1%

• They will decrease further

• They will move up close to the 2% objective

• They will be unpredictable

What is the committee's commitment regarding inflation?

• To keep it below 1%

• To raise it to 2%

• To reduce it to 0%

• To let it fluctuate freely

What is a potential risk if inflation continues below 2%?

• Higher import prices

• Increased unemployment

• Economic overheating

• Need to adjust monetary policy

What could happen if the economy overheats due to tight labor markets?

• A rapid tightening of monetary policy

• A decrease in wages

• A reduction in inflation

• An increase in unemployment