Federal Reserve officials are moving toward abandoning a key policy framework introduced in 2020, which emphasized a flexible average inflation targeting approach amid persistently low rates and subdued price pressures. With inflation now elevated and more unpredictable, the central bank views the previous strategy as outdated. Policymakers are recalibrating their tools to address current economic conditions, where controlling inflation has taken precedence over stimulating employment. The shift marks a significant evolution in the Fed’s approach, reflecting the challenges posed by a rapidly changing economic environment. This strategic pivot suggests a more responsive stance to inflation dynamics rather than adhering to a pre-defined long-term average.
— news from The Wall Street Journal
— News Original —
Powell Plans U-Turn on an Economic Strategy That Soured
Federal Reserve officials are preparing to quietly retreat from a signature policy innovation unveiled five years ago. n nIn 2020, officials revamped their approach to setting rates, focusing on the risks brought on by near-zero interest rates and low prices. Today, officials are preparing to scrap that approach, now viewed as no longer relevant when facing the opposite problem of high and more volatile inflation.