After a nearly two-year review, U.S. Federal Reserve officials feel they've hit on a better way to meet their key goals of steady inflation and ...
After a nearly two-year review, U.S. Federal Reserve officials feel they've hit on a better way to meet their key goals of steady inflation and maximum employment.
"The situation is really perilous right now and there is little that monetary policymakers at this point have left in their arsenal," said David Wilcox, former head of the Fed's research division and now a senior fellow at the Washington-based Peterson Institute for International Economics. Normally held at the mountain resort of Jackson Hole, Wyoming, but being conducted virtually this year because of the pandemic, the symposium has been used in the past by Fed chiefs to signal policy shifts, and that will be the expectation when Powell begins speaking at 9:10 a.m. EDT on Thursday.
That has become a chronic problem not only for the Fed but for central bankers around the world. Without some inflation, interest rates remain lower than normal, and that affords little room to help the economy by reducing them when recessions hit, as happened this year. Central banks are then faced with cutting rates quickly to zero and using politically more difficult tools like bond-buying or credit programs to support businesses and families.
At its policy meeting next month, the Fed is expected to change how it characterizes its inflation goal. Instead of looking to achieve 2per cent inflation on an annual basis, it is expected to aim to achieve that level as an average over a longer time, and explicitly allow perhaps years of faster price increases to make up for years when prices rose too slowly.
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