Language that jumps out in this latest FOMC statement comes in the final paragraph. Clever, as Bernanke & Co. know that in show business, it’s always important to have a strong close.
The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.
Translation: We’re still prepared to do whatever it takes to get this economy off the ground, and ready to do battle with deflation.
See that little trick they used? Instead of using the words “deflation” or “deflationary” or “disinflation,” the committee said it’s ready to “return inflation” to levels “consistent with its mandate” (price stability.)
Committee certainly isn’t talking about returning inflation to lower levels. Sounds like the first time the FOMC is actually, in a very indirect way, saying it’s locked & loaded for deflation.