What you have said would be correct if the situation you are describing was what the question stated. When you say “they don’t think inflation is a problem for the next few months, that’s why they lowered their target inflation rate”……you are confusing the issue here. There is a fundamental difference between shifting the supply of money to attemp to obtain a target inflation rate, and shifting policy to establish a new target. There is a difference between the public’s expectation of inflation, the FED’s expectation of inflation, the actual inflation rate, and the ideal rate the the FED is targeting. Economic conditions do not always permit estimated or actual inflation to be at its targeted rate. You are assuming estimated and targeted are one in the same, but this is not the case. Think of it like this: Assume (as always in steady state analysis, but really a bit unlikely) that we start in equilibrium…..inflation is at target, output gap is zero, unemployment at perceived natural rate, etc…..Now….due to some shift in policy (political pressures to reduce inflation further, academic studies showing inflation is more productive at lower level, or some other reason), central bank decides it will lower target inflation rate. Simply reducing target doesn’t do much, so action must be taken to obtain it. There are two main methods of doing this: 1) Raise rates, introduce recessionary gap, send signal to public that inflation will permanently be targeted at a lower rate. As rate is slowly acheived, negative output gap begins to close, unemployment slowly retreats to a new natural rate, and we are in a new steady state. 2) They get lucky as hell and experience a very timely negative permanent inflation shock. This is a bit unlikely to happen. Either way, policy has shifted such that a new lower target has been established, and hence expectations going forward are that, while we will see fluctuations around this target, they will be at a lower level nonetheless.