For decades, the Federal Reserve made clear its readiness to raise interest rates at the earliest signs of creeping inflation. Behind the Fed’s new thinking is an ailing economy in the grip of a viral pandemic and a stubbornly low inflation rate that has long defied the Fed’s efforts to raise it. On Thursday, Powell will address the Fed’s annual gathering of global central bankers, normally held in picturesque Jackson Hole, Wyoming, amid the towering Grand Teton mountain range but this time being conducted virtually. The most consequential change would be for the Fed to replace the 2% annual inflation target it adopted in 2012 — and has never managed to reach consistently — with some form of average inflation targeting. Right now, the Fed’s preferred inflation gauge is hovering at a sub-1% annual rate, well below the 2% target.

Source: The Standard August 26, 2020 15:22 UTC