James Bullard, Speech: Is the Fed “Behind the Curve”? Two Interpretations

“The 1983 FOMC, which was also looking at a core PCE inflation rate similar to today’s, had a different approach to monetary policy and spoke more about monetary factors affecting inflation. The FOMC kept the policy rate relatively high in the face of declining inflation. The associated ex-post real interest rate was relatively high. The subsequent experience was that core PCE inflation was below 5.4% for the next 10 years. The real economy also stabilized with no recession until 1990-91. The contrast between the 1974 and 1983 experiences convinced many that it was important to avoid getting “behind the curve” on inflation.”