Policymakers appeared to agree on a broad general interpretation of the symmetric inflation objective. Bostic wouldn’t be surprised to see a “modest overshoot” of 2% and thought that inflation above 2% for a while “is not a problem that would, in and of itself, necessitate a more aggressive policy response” (May 9). Instead, he saw it as a “well calibrated approach” in the context of the symmetric target. Kaplan was optimistic about wage pressures building and said of inflation: “We don’t want to run persistently above 2 percent and we don’t want to run persistently below 2 percent” (May 7). Bullard had no issues with “some overshooting” of 2% (May 11). Barkin alluded to the need to maintain the credibility of the inflation objective but also saw little wage pressure (May 7). Mester thought that “some of the pickup reflects higher commodity prices and some of the strength is likely to be temporary, as low readings from last March drop out of the calculations” (May 14). Powell said that “markets should not be surprised by our actions if the economy evolves in line with expectations” (May 8).
The recent rise in oil prices caught the attention of some policymakers. Bullard was skeptical oil prices would reach $100/bbl because U.S. supply makes prices above $70/bbl “sticky.” Kaplan warned of greater volatility as a result of industry investment trends and cautioned that new shale production is unlikely to meet global demand growth. Bostic argued that the impact of oil prices on broader activity is less dramatic than in the past. Mester thought the rise in commodity prices would affect inflation, but said, “we’re going to look through these transitory movements and look at where inflation is going.”
On tax reform, Bullard saw it as allowing the economy to “grow more rapidly without inflationary side effects.” But Bostic thought “the jury is still out” on how tax reform for companies would benefit the wider economy (May 9). He noted, “we know the pace of stock buybacks has accelerated. We know firms are deleveraging to some extent.” He saw the current uncertainty on trade policy as “almost completely” replacing the earlier optimism on tax policy. Evans thought that the neutral rate could rise with a lag as productivity improves (May 7) and found arguments that the NAIRU was lower than 4.5% compelling.