Federal Reserve Chair Janet Yellen today revealed her bias to overshoot on inflation. The Fed’s current inflation target of 2% is symmetric, which means that the Fed should be willing to overshoot on inflation for as long and as far as we undershot inflation in recent years. The goal is to allow for catch-up after the Great Recession.
The focus on pushing for a “high-pressure economy” underscores Yellen’s preference to hold out for a higher level of participation in the labor market. She is a veteran of the boom in the late 1990s