From Fed Chair Janet Yellen: Inflation, Uncertainty, and Monetary Policy. Excerpts:
Today I will discuss uncertainty and monetary policy, particularly as it relates to recent inflation developments. Because changes in interest rates influence economic activity and inflation with a substantial lag, the Federal Open Market Committee (FOMC) sets monetary policy with an eye to its effects on the outlook for the economy. But the outlook is subject to considerable uncertainty from multiple sources, and dealing with these uncertainties is an important feature of policymaking. Key among current uncertainties are the forces driving inflation, which has remained low in recent years despite substantial improvement in labor market conditions. As I will discuss, this low inflation likely reflects factors whose influence should fade over time. But as I will also discuss, many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent. My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability.
…
To conclude, standard empirical analyses support the FOMC’s outlook that, with gradual adjustments in monetary policy, inflation will stabilize at around the FOMC’s 2 percent objective over the next few years, accompanied by some further strengthening in labor market conditions. But the outlook is uncertain, reflecting, among other things, the inherent imprecision in our estimates of labor utilization, inflation expectations, and other factors. As a result, we will need to carefully monitor the incoming data and, as warranted, adjust our assessments of the outlook and the appropriate stance of monetary policy. But in making these adjustments, our longer-run objectives will remain unchanged–to promote maximum employment and 2 percent inflation.
emphasis added
Yellen still thinks inflation will pick up, and that the FOMC is on the correct course.