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Fed Governor Milan Sees Inflation Returning to Target Within a Year

Milan said higher oil prices have not shifted inflation expectations and indicated the Federal Reserve could cut rates by 1 percentage point over a year while also reducing its balance sheet.

Summary

Fed Governor Milan said higher oil prices have not affected inflation expectations and that inflation should return to the Federal Reserve’s target within one year. He added that the central bank could gradually cut interest rates by 1 percentage point within a year. Milan also said he wants to reduce the Fed’s balance sheet, adding a balance-sheet policy element to his broader monetary policy outlook.

Terms & Concepts
  • Inflation expectations: The public’s and markets’ outlook for future price increases, which can shape spending, wage decisions, and central bank policy.
  • Federal Reserve: The central bank of the United States, which sets monetary policy and manages tools such as interest rates and its balance sheet.
  • Balance sheet: A central bank’s holdings of assets and liabilities; reducing it usually means shrinking liquidity added through past asset-purchase programs.