This used to be one of the Fed’s major concerns as they are steeped in inflation expectations theory.

It could still signal a need to keep a modestly positive ‘real rate’ though the large ‘output gap’ is telling them otherwise.

History says they’ll put most of the weight on the output gap, though a negative real rate is problematic for most FOMC members.

Should core inflation measures go negative, they will be a lot more comfortable with the current zero rate policy.

Interesting that the employment cost was just reported up 1.8% which shows how little it went down even in the face of
a massive rise in unemployment.