Will the U.S. slowing down really damp the price of oil, or the price of food, rice, or flour, cornmeal, the price of steel? … It’s not clear to me that a mild slowdown will put a dent in price pressures domestically. Obviously if you have a tail risk of a very severe global slowdown, then yes, I can see that. I don’t see that in the cards at least from my limited perspective. If you think in closed-economy terms, that’s more likely to obtain. If you think in global terms, it is less likely to obtain unless the whole world slows down.

A slowing economy is no guarantee of slowing inflation pressures.

From audience Q&A as reported by Reuters.

My concerns about inflation really tie in to this notion that, if you look at the broader base from which we see price increases, the more concerns I have that it's not these isolated price shocks, but that it's ... broad based.

From audience Q&A as reported by Reuters

Inflation is a problem now. It is too high and personally I would be uncomfortable in waiting for economic slack to bring it down.

...

I am particularly concerned about movements in measures of expected inflation.

From comments to press, as reported by Reuters

Looking at our record over the last 4 years of inflation that has fluctuated between just below 2 percent and (above) 3-1/2 percent, the danger in that pattern persisting is that people might become accustomed to it, and come to expect inflation to continue at rates greater than we would like to see. ...

A deterioration of inflation psychology is a major concern because it is very difficult to unwind.

From comments to press, as reported by Reuters

Over the past year, inflation has been elevated by rising food, energy and other commodity prices and declines in the value of the dollar that have boosted import prices. However, several developments suggest that inflation is likely to moderate over the next couple of years. For example, broad measures of compensation have expanded quite modestly over the past year, and productivity growth has been fairly robust. In addition, futures markets point to a leveling out of energy and other commodity prices. Furthermore, the weakening in economic activity should put somewhat greater downward pressure on inflation going forward.

The Federal Reserve cannot, however, be complacent about inflation. Most survey measures of longer-run inflation expectations have remained reasonably well behaved. But measures of inflation compensation derived from the differential between nominal and real Treasury yields have moved up for the period of five-to-ten years ahead. Such measures are an imperfect indicator of inflation expectations, because they are affected by inflation risk and illiquidity. Nevertheless, these movements highlight the risk that our attempts to deal with problems in the real economy could lead to higher inflation expectations and an erosion of our credibility.

With regard to monetary policy, the FOMC has taken significant steps since September, cutting the federal funds rate by 3 full percentage points to an accommodative level of 2¼ percent. I consider such accommodation an appropriate response to the contractionary effects of the ongoing financial shock and the housing downturn, and I anticipate that the resulting stimulus, combined with that of the fiscal package, will foster a moderate pickup in growth later this year. At the same time, consumer inflation seems likely to decline gradually to somewhat below 2 percent over the next couple of years, a level that is consistent with price stability.

However, economic prospects remain unusually uncertain, and the downside risks to growth are significant. Going forward, the Committee must carefully monitor and assess the effects of ongoing financial and economic developments on the outlook for output and inflation, and be prepared to act in a timely manner to promote the economy’s return to sustainable paths for output and employment.

Consistent with our dual mandate of promoting maximum employment and stable prices, we also need to be alert to risks to price stability. Increases in food and energy prices have pushed up overall consumer prices and are putting upward pressure on core inflation and inflation expectations. We will continue to monitor the inflation situation closely. And, more broadly, in my view, as financial intermediation channels reset, monetary policy will become still more efficacious.

Fed policy--both with respect to liquidity tools and monetary policy--is partially offsetting the consequences of the liquidity and credit pullback on real activity. But we must be careful to not ask policy to do more than it is rightly capable of accomplishing. The problems afflicting our financial markets are indeed long-in-the-making. Correspondingly, the curative process is unlikely to be swift or smooth. Time is an oft-forgotten, yet equally essential, tool of our policy response.

Inflation tends to fall noticeably during recessions, and that provides a downside risk for my inflation forecast.

The Federal Reserve cannot, however, be complacent about inflation. Most survey measures of long-run inflation expectations have remained well behaved. But some measures of inflation compensation derived from the differential between nominal and real Treasury yields have moved up. Such measures are an imperfect indicator of inflation expectations, because they are affected by inflation risk and illiquidity. Nevertheless, these movements highlight the risk that our attempts to deal with problems in the real economy could lead to higher inflation expectations and an erosion of our credibility.

Overall, I expect PCE price inflation to fall below 2 percent next year based on futures markets’ expectations of a leveling out of energy and other commodity prices, and the projected weakening of labor and product markets.

Inflation is a very real phenomenon out there. It is there. We have to protect our credibility.

From audience Q&A as reported by Reuters.

With regard to financial conditions more broadly, markets have not yet stabilized. Although financial instability originated in the residential mortgage-backed securities market, it has spread to affect a variety of credit markets via market linkages or institutional interdependencies. The experience has been traumatic, at times generating primal emotions. Market volatility has been driven by fear, distrust, and flight to safety. I emphasize this point because financial system stability is a central focus of Fed policy at the moment.

At the same time, inflation has become a more prominent concern.

I have been a bit disappointed by the incoming inflation data because they have been a bit above what I earlier thought.

From Q&A as reported by Market News International

If we again begin to grow, at a time when inflation is still at a very high base level, then we could (create) conditions for sustainable inflation over the long term.

...

Consumer price inflation is rising, and the personal consumption expenditure basket is rising to uncomfortable levels. ... What we are trying to do ... is condition expectations of where we go, going forward, to make sure that inflation doesn't get out of control. Because we know that there is a lag in monetary policy

As reported by Reuters

Although most of the recent concern about the U.S. economy has been focused on growth, we must also be mindful of inflationary pressures. The news here has been somewhat disappointing.

...

That said, our forecast is for inflation to moderate over the next two years with a leveling out of energy and commodity prices and an easing of pressures on resource utilization due to the slower pace of economic activity. Still, our uncertainty about the inflation outlook has increased, and we will continue to monitor inflation developments very carefully.   

Even so, I expect both total and core inflation to moderate over the next few years, edging down to under 2 percent, an outcome that is broadly consistent with my interpretation of the Fed’s price stability mandate. And I see the risks to this outcome as roughly balanced.