That\u2019s Heritage Foundation economist EJ Antoni<\/a> yesterday. Dr. Antoni continues:<\/p>\n Increasingly, people are realizing that the 2% target is long gone. We\u2019re looking at 3% basically as the implicit target. Now we\u2019re in for a lot of pain. So the question is just, is this going to be 1920 or is it going to be 1929<\/p>\n<\/blockquote>\n I wondered what the basis for this assertion was. As usual with Dr. Antoni, it\u2019s hard for me to determine. Take a look at 3 year median expected CPI inflation of consumers<\/strong><\/em>.<\/p>\n Figure 1:<\/strong> 3 year median expected CPI inflation deviation from 2.45% target (blue). NBER defined peak-to-trough recession dates shaded gray. Source: NY Fed<\/a>, NBER, and author\u2019s calculations.<\/em><\/p>\n Seems to me that the Fed\u2019s coming close to re-establishing credibility, insofar as households are concerned.<\/p>\n One can measure Fed credibility with respect to its inflation target in a variety of ways. I use plot three measures.<\/p>\n Figure 2:<\/strong>\u00a0Bordo-Siklos (2015)<\/a>\u00a0credibility measure using 2.45% target (blue), squared deviation of expectation from 2.45% target (green), 75th percentile deviation from 2.45% target (red). NBER defined peak-to-trough recession dates shaded gray. Source:\u00a0NY Fed<\/a>, NBER, and author\u2019s calculations.<\/em><\/p>\n It\u2019s true the folks at the 75th percentile remain skeptical \u2014 but no more so than at the end of the Trump 1.0 administration. The Bordo-Siklos measure seems almost dead on.<\/p>\n<\/p><\/div>\n <\/p>\n\n
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