The Fed's Two Percent Inflation Target Is an Average, not a Ceiling

This is an important point that was left out of a NYT piece discussing Janet Yellen plans for the Federal Reserve Board's interest rate policy. The piece gave Yellen's comment that it would be bad policy to wait until inflation was at 2.0 percent before more aggressively raising interest rates.

While Yellen may have been using shorthand, as she has repeatedly pointed out, the Fed views the 2.0 percent average inflation as a target. The 2.0 percent figure is not viewed as a ceiling. This means...