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 risks does the text mention regarding inflation and monetary policy?

What is the potential consequence of tightening monetary policy too rapidly?