http://bruegel.org/2017/06/the-feds-problem-with-inflation/
Larry Summers offers 5 reasons why he thinks the Fed may be making a mistake. First, the Fed is not credible with the markets at this point. Its dots plots predict four rate increases over the next 18 months compared with the market’s expectation of less than two. The markets do not share the Fed’s view that inflation acceleration is a major risk; indeed they do not believe the Fed will attain its 2 percent inflation target for a long time to come. Second, the Fed proclaims that it has a symmetric commitment to its 2 percent inflation target. After a full decade of sub-target inflation, policy should be set with a view to modestly raise target inflation during a boom with the expectation that inflation will decline during the next recession. A higher inflation target would entail easier policy than is now envisioned. Third, preemptive attacks on inflation, such as preemptive attacks on countries, depend on the ability to judge threats accurately. The truth is we have little ability to judge when inflation will accelerate in a major way. The Phillips curve is at most barely present in data for the past 25 years. Fourth, there is good reason to believe that a given level of rates is much less expansionary than it used to be given the structural forces operating to raise saving propensities and reduce investment propensities. Fifth, the Fed to abandon its connection to price stability, it simply needs to assert that its objective is to assure that inflation averages 2 percent over long periods of time. Then it needs to acknowledge that although inflation is persistent, it is very difficult to forecast and signal that it will focus on inflation and inflation expectations data rather than measures of output and employment in forecasting inflation. With these principles internalized, the Fed would lower its interest-rate forecasts to those of the market and be more credible. It would allow inflation to get closer to target and give employment and output more room to run.