Making Sense of Unusually Low Inflation

Despite historically low interest rates and increasingly favorable economic conditions, inflation has remained persistently below the Fed’s 2% target for nearly six years. While stubbornly low inflation would have been cause for alarm in the past, few seem to be worried. With other economic indicators headed in a positive direction, the Fed has indicated its intention to continue to raise rates in order to achieve equilibrium between the federal funds and inflation rates and wind down its quantitative easing program. When it comes to the current economy, navigating it may require a new way of thinking about how we approach age-old concepts, including inflation.