EFTA Document EFTA01459053

Although inflation is well below the Fed's objective, it is expected to rise ahead • Inflation still well below 2% target: headline inflation near 0%; core inflation 40-70bp below target • Weakness due primarily to forces Fed describes as temporary (e.g., USD surge, oil price drop) • Inflation outlook is more important than current data - Monetary policy acts with a lag: Fed thinks it takes 12-18 months for policy to have full effect - Fed must be reasonably confident inflation will re