Yellen really doesn't want to go back to buying bonds
- Idiosyncratic factors don't full explain inflation miss
- If the Fed view on inflation changes, it would require an alteration in monetary policy
- Has full confidence that Fed can still carry out responsibilities with only three governors
- If we're living in a low-inflation world, future policy makers will have to consider what actions are available to them
- I would want to keep QE in the toolkit in case of crisis
One story so far is Yellen waving the white flag on understanding inflation. The other is that the Fed is committed to running off the balance sheet, even if they hit a bump in the road.
