Powell Wants Inflation Expectations Persistently Higher

Q: Inflation expectations are showing multi-year highs. Is that consistent with your inflation outlook? Does it worry you? Does it reflect the success of the Fed's new inflation framework with the wider public?

- A: I would say that pre-pandemic, expectations were at the low end of what would have been consistent with a 2% inflation target, particularly our 2% inflation target which calls for a 2% average.

• Inflation expectations went down a bit at the beginning of the pandemic. Now they've moved back up to broadly where they were in 2018 or in some cases 2014, more consistent with our mandate.
• We want them to be higher and on a persistent basis. We want inflation to be running higher than the last quarter-century. We want it to average 2%, not 1.7%. For that we need expectations consistent with that, well anchored at 2%. We don't see that yet.
• But breakevens have moved up in a way. They are based on CPI. But they're now at levels that are pretty close to our mandate consistent where before they were below. We monitor inflation expectations very carefully.