re: Oct 29th Fed Statement

Would velocity give us any indication of increasing inflation / rate hikes? I don't understand how inflation can increase if velocity is still so low.

To attempt an answer, my understanding is that velocity is a ratio of GDP to money supply. With the $5.6+ trillion of QE supply since 2008, it's easy to see why velocity is currently so low. To paraphrase Sen. Dirkson, a trillion here and a trillion there, pretty soon we're talking about real money.

So now that QE has tapered off and ended, there are two questions -

How is the boosted supply absorbed into the system without causing inflation? and

Once velocity turns upward, what will this tell us about the when and how much of inflation?