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2. Core inflation
Inflation without the food and energy components needs to stabilize. "We expect
inflation to remain quite low because of the depressing influence of energy price
declines and the dollar,'' Yellen went on. "We will be looking at the inflation data
carefully'' to discern what's happening beyond those short-term influences.
In other words, a stabilization or rise in core prices, excluding food and energy,
might have more weight than the actual headline price data.
3. Wage growth
Wages need to break out of their slump. "We will be looking at wage growth" as a
signal of inflation though "I wouldn't say either that that is a precondition to raising
rates."
There is plenty of anecdotal evidence from the likes of Target Corp. and Wal-Mart
Stores Inc., for example, that wages are edging higher. Yet there's not much support
in the data. Average hourly earnings rose just 2 percent over the past year through
February. That is in line with the average since the recession ended in June 2009.
4. Inflation expectations
What households and investors expect inflation to be in the future has to rise a bit.
"We'll be watching inflation expectations." For one thing, "market-based measures"
of expectations are too low. "If they were to move up over time, that would probably
serve to increase my confidence."
The measure that looks at inflation expectations five years from now fell as low as
1.75 percent in January. A move back to 2 percent would add to confidence.