Powell Doesn't See Strong Evidence of Shift in Inflation Psychology

Q: What's the neutral rate? Is it appropriate to move beyond it?

• A: It's not something we can identify with precision... the current estimates on the FOMC are 2 to 3 percent, a longer run estimate. We are raising rates expeditiously to what we see as the broad range of plausible levels of neutral. But there's not a bright line drawn on the road that tells us when we get there.
• If the path involves levels that are higher than estimates of neutral, we will not hesitate to go to those levels.

Q: Is inflationary psychology changing?

• A: We don't see strong evidence of that yet but that doesn't make us comfortable. We don't see a wage price spiral. Long-term inflation expectations have been reasonably stable and moved up but only to 2014 levels by some measures.
• It's a risk that we simply can't run, we can't allow a wage price spiral to happen and can't allow inflation expectations to become unanchored, we can't allow it to happen.