I just missed this analysis. The latest FOMC Minutes of meetings held on January 9, 21, and 29-30, 2008. The last table shows FOMC members expect lower growth and higher inflation:
|Growth of real GDP||1.0 to 2.2||1.8 to 3.2||2.2 to 3.2|
|October projections||1.6 to 2.6||2.0 to 2.8||2.2 to 2.7|
|Unemployment rate||5.0 to 5.5||4.9 to 5.7||4.7 to 5.4|
|October projections||4.6 to 5.0||4.6 to 5.0||4.6 to 5.0|
|PCE inflation||2.0 to 2.8||1.7 to 2.3||1.5 to 2.0|
|October projections||1.7 to 2.3||1.5 to 2.2||1.5 to 2.0|
|Core PCE inflation||1.9 to 2.3||1.7 to 2.2||1.4 to 2.0|
|October projections||1.7 to 2.0||1.5 to 2.0||1.5 to 2.0|
So, despite their claims that inflation expectations are anchored we see most expecting higher inflation. Considering the fact that Fed isn’t very good at forecasting, the inflation is still expected to trend higher than previous estimates.
If we recall, many Fed Presidents have raised rising inflation as a concern but suggest risks from lower growth are higher. They defended the rate cuts giving similar line of thought.
This does indicate that stagflation pressures are building up (I had suggested the same long back). It will be interesting to see the approach adopted by policymakers in times to come.