New research out of the Federal Reserve calls into question a key plank of modern central banking, the idea that inflation expectations matter to monetary policy and can be managed.
For a long time, Fed officials, as well as their counterparts at other major central banks, have operated with the view that the public’s expectation about inflation exerts a powerful influence on current price pressures. Right now, Fed officials have been using what they see as relatively steady readings of long-term inflation expectations to…