Fed should be soft on inflation - BNPP

In view of the analysts at BNP Paribas, it is completely reasonable for the Fed to be soft on inflation as a low level of equilibrium interest rates still haunts the US economy, and it would be irresponsible for the Fed to ignore this.

Key Quotes

“At best, this low-rate “regime” would prove to be temporary, and rates of productivity and trend growth would recover, allowing a higher level of interest rates to be sustained. The Fed cannot set policy based on a wish of what might happen in the future. One could argue it has already made this mistake once during this recovery (by assuming equilibrium rates were too high) and cannot afford to make it again.”