Jerome Powell targets 2% average inflation, focus shifts to jobs

By Administrator_India

Capital Sands

The Federal Reserve on Thursday rolled out an aggressive new strategy to restore the United States to full employment and lift inflation back to healthier levels in a world where it now believes that “downward risks to employment and inflation have increased.”

Under the new approach, laid out in a fresh statement on the Fed’s longer-run goals and monetary policy strategy approved by all 17 of its policymakers, the US central bank will seek to achieve inflation averaging 2 per cent over time, offsetting below-2 per cent periods with higher inflation “for some time,” and to ensure employment doesn’t fall short of its maximum level.

“Our revised statement reflects our appreciation for the benefits of a strong labour market, particularly for many in low- and moderate-income communities, and that a robust job market can be sustained without causing an unwelcome increase in inflation,” Fed Chair Jerome Powell said in prepared remarks for a speech explaining the changes.

With the US economy in a deep economic crisis and just months before Americans vote in a contentious election, the Fed’s new approach is both an acknowledgment of fundamental changes in the economy that began well before the pandemic, and a map for how the Fed plans to conduct policy in a world where weak growth, low inflation and low interest rates are seen as here to stay.