“Federal Reserve Chair Janet Yellen is concerned that the standard models central banks use to forecast inflation may be broken.  Behind her disquiet: the failure of the models to foresee the path of prices in the U.S. during the last recession and its aftermath and in Japan during its deflationary period from 1998 to 2012. U.S. inflation has been higher than the simulations suggested, while Japanese price declines proved more persistent.  Yellen alluded to her concerns in a speech last week, saying the Fed has to ‘watch carefully’ to see if inflation picks up as the central bank projects — and hopes — during the next few years.”

http://www.bloomberg.com/news/2014-04-25/yellen-concerned-fed-model-fails-to-predict-price-moves.html

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