Entering 2015, most economists expected that the Federal Reserve would finally begin raising short-term interest rates. Fewer than two weeks in to the year and that thesis is already beginning to crumble.
For seven years, the Fed kept interest rates at rock-bottom levels and employed a massive money-printing program called
Quantitative Easing in the hopes of boosting the money supply, expanding credit, and causing inflation to jump-start the economy (so the theory goes). Many experts have long waited for the Fed to "normalize" policy and raise rates, for reasons that include a desire to stop expanding the money supply, and wanting the Fed to have a cushion to lower them once again when another crisis occurs.
While credit finally appears to be coming more available, neither the mild-mannered inflation the Fed wanted nor the rampant hyperinflation Fed detractors prophesied has materialized.
In 2014 the CPI inflation rate was 1.3%, the lowest since 2008. However, most economists, including those at the Fed,
like to see 2% inflation.
[caption id="attachment_112614" align="aligncenter" width="542"]
Graph from www.usinflationcalculator.com.[/caption]