Federal Reserve Adjusts Inflation Target, Rate Unchanged

FILE – In this June 30, 2020, file photo Federal Reserve Board Chairman Jerome Powell, reflected in the sneeze guard set up between himself and members of the House Committee on Financial Services, speaks during a hearing on oversight of the Treasury Department and Federal Reserve pandemic response on Capitol Hill in Washington. The Federal Reserve adjusted its inflation target to seek price increases above 2% annually, a move that will likely keep interest rates low for years to come. The Fed on Wednesday, Sept. 16, also left its benchmark short-term rate unchanged at nearly zero, where it has been since the pandemic intensified in March. (Bill O’Leary/The Washington Post via AP, Pool)

The Federal Reserve adjusted its inflation target to seek price increases above 2% annually, a move that will likely keep interest rates low for years to come.

WASHINGTON: The Federal Reserve adjusted its inflation target to seek price increases above 2% annually, a move that will likely keep interest rates low for years to come.

The Fed on Wednesday also left its benchmark short-term rate unchanged at nearly zero, where it has been since the pandemic intensified in March. Fed officials also indicated in a set of economic projections that they expect the rate to stay there at least through 2023.


The Fed’s benchmark interest rate influences borrowing costs for homebuyers, credit card users, and businesses.

The Fed’s statement says that because inflation has mostly fallen below its target of 2% in recent years, Fed policymakers now will aim to achieve inflation moderately above 2 percent for some time.” It also says it will keep rates low until inflation averages 2% over an unspecified period.

The change is significant for the central bank, because it means that Fed officials will accept higher inflation to make up for its previous shortfalls below 2%. Previously, the Fed has ignored such shortfalls.

Fed chair Jerome Powell first said last month that the Fed would seek inflation above 2% over time, rather than just keeping it as a static goal.

The change reflects a growing concern at the Fed that in recessions, inflation often falls far below 2%, but it doesnt necessarily reach 2% when the economy is expanding. Over time, that means inflation on average falls further from the target. As businesses and consumers come to expect increasingly lower inflation, they act in ways that entrench slower price gains.

The Fed prefers a little inflation because that gives the central bank more room to cut or raise short-term interest rates.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor


Speak Your Mind

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Get in Touch

350FansLike
100FollowersFollow
281FollowersFollow
150FollowersFollow

Recommend for You

Oh hi there 👋
It’s nice to meet you.

Subscribe and receive our weekly newsletter packed with awesome articles that really matters to you!

We don’t spam! Read our privacy policy for more info.

You might also like

The Wild World of Extreme Tourism for Billionaires

Since the pandemic, Madison has noticed an uptick in high-net-worth individuals booking out entire...

EU May Combine Green Deal With White Deal To...

Getty Images As EU national leaders prepare for...

Travel in world class Metro Lite, Metro Neo Transport...

New Delhi: Presenting the Union Budget 2021, Finance Minister Nirmala Sitharaman said the government...

UFC President Dana White Says Jorge Masvidal Vs. Colby...

ABU DHABI, UNITED ARAB EMIRATES - JULY 12: Jorge...