KC Fed's George reiterated the appropriateness of the wait and see stance
KC Fed's George reiterated the appropriateness of the wait and see stance given the lack of inflation pressures, in her text on "Is Low Inflation a Problem for the United States." The more hawkishly inclined voter added current inflation does not demand a policy response. She is "not convinced that a slight undershoot of inflation below objective requires and offsetting overshoot," and that a 50 bp deviation from the inflation goal seems acceptable. On a month-to-month basis, prices usually jump around due to "transitory" factors. She worries that "lower rates might fuel asset price bubbles, create financial imbalances, and ultimately a recession." There is a legitimate concern over the limited policy space. The biggest risks she sees are trade policy uncertainties and slowdown in growth abroad, and particularly in China, the euro area, and the UK. She believes the details of Q1 GDP are not as strong as the 3.2% headline gain suggests.