http://blog.principal.com/2012/12/12/ladies-and-gentlemen-we-have-explicit-fed-targets/ Investment management insights and commentary Tue, 21 May 2013 19:55:14 +0000 hourly 1 http://wordpress.org/?v=3.5.1 http://blog.principal.com/2012/12/12/ladies-and-gentlemen-we-have-explicit-fed-targets/comment-page-1/#comment-40 Robin Anderson, Economist, Principal Global Investors Wed, 02 Jan 2013 21:37:24 +0000 http://blog.principal.com/?p=1361#comment-40 Thanks for reading and thanks for the comment! Sorry about the delayed response…holidays and everything. Stagflation is higher inflation coupled with stagnant growth like in the 1970s; you’ve got that exactly right. But we don’t see that sort of environment returning anytime soon. Actually, we believe that the underlying fundamentals of the U.S. economy are better than is commonly realized: housing is clearly better; consumer confidence has been coming back; retail sales are persistently good; the drag from state and local government layoffs and budget cuts is over. So, absent serious problems over the fiscal cliff, the economy should return to 2.5% to 3% growth. The Fed’s current intention is to not worry so much about a small pickup in inflation; but we think that would be accompanied by faster growth. The question for Homo economicus dubiī (the doubtful economic human) is whether current Fed policy will lead to higher inflation than the Fed could tolerate; and that could happen, but likely not very soon.

]]> http://blog.principal.com/2012/12/12/ladies-and-gentlemen-we-have-explicit-fed-targets/comment-page-1/#comment-39 Anonymous Fri, 21 Dec 2012 17:41:25 +0000 http://blog.principal.com/?p=1361#comment-39 Excuse me while I be a bit Homo economicus dubiī, But if inflation goes above 2.5% and one of the explicit targets is “price stability.” Would this mean that stagflation would likely be one of the results?

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