Photographer: Michael Nagle/Bloomberg
Photographer: Michael Nagle/Bloomberg

A quick point worth noting from this morning's gross domestic product report. The report is largely a yawn, containing few interesting revisions to earlier estimates of economic progress in the second quarter. But there's one number that caught my attention. The Bureau of Economic Analysis has revised its estimates for the personal consumption expenditures price index. It's an important number, because this is the index the Federal Reserve targets. And remember, it's aiming for inflation of 2 percent.

Instead, the index fell in the second quarter. That is, the U.S. is experiencing deflation.

I won't overstate this. It's just one quarter, and it's evident in just one index, and even when I cherry-pick this interesting number, prices aren't really falling very quickly. The PCE deflator fell at an annual rate of only 0.1 percent in the second quarter.

But it's striking that the Fed's preferred price measure is declining at a time when the main conversation among policy makers is when and how to tighten monetary policy, rather than to make it more accommodative.

Now I don't really believe that widespread deflation has beset the U.S. economy. A better gauge of inflation comes from the core PCE deflator, which excludes food and energy. But even that rose only at an annual rate of 0.6 percent. Looking over a longer period -- say over the past year -- the headline and core PCE deflators rose by 1.1 percent and 1.2 percent, respectively.

Right now, the risk of deflation is greater than the risk of explosive inflation. And the probability of continuing to undershoot the inflation target is far greater than the probability of overshooting it. Indeed, the Fed's own estimates suggest that it expects to continue undershooting the inflation target for at least three more years.

The deeper problem is that the Fed's target is widely perceived to be asymmetrical. Imagine the response among policy makers if headline inflation were running at 4 percent, and core inflation were at 3 percent. In the colorful words of Chicago Fed President Charlie Evans, they "would be acting as if their hair was on fire." We're experiencing the mirror image -- an equivalent undershooting of the inflation target, but without an equivalent policy response.

With inflation continuing to undershoot the Fed's inflation target, and millions remaining needlessly unemployed, policy makers need to start acting as if their hair were on fire.

(Justin Wolfers is a Bloomberg View columnist. Follow him on Twitter.)