Jerome Powell, Chairman of the Federal Reserve, said the Fed, in its new strategy, will target average inflation in his remarks prepared at the Jackson Hole Virtual Economic Policy Symposium.
With the initial reaction, the US Dollar Index (DXY) fell to a six-day low at 92.64 before recovering its losses. At the time of writing, the DXY was down 0.1% on the day to 92.78.
Follow our live coverage of the market’s reaction to Powell’s remarks.
Key takeaways from the Fed’s official statement
“The Fed is putting jobs ahead of inflation in the new monetary policy strategy, will seek to ensure that employment does not fall below its maximum level.”
“The Committee is now looking to achieve inflation that averages 2% over time, will compensate for periods of low inflation with inflation above 2% for some time.”
The Committee believes that the downside risks to employment and inflation have increased.
Longer-term inflation expectations, firmly anchored at 2%, strengthen the committee’s ability to promote maximum employment.
Change driven by underlying changes in the economy, including lower potential growth, ever lower interest rates, and low inflation.
“Hard to overestimate the benefits that higher employment levels have for racial, ethnic and other minorities” Left for Too Long “
“The changes to the Fed’s jobs strategy reflect an appreciation of the benefits of a strong labor market for low- and middle-income communities.”
“The Committee believes that the level of the federal funds rate consistent with maximum long-term employment and price stability has declined from its historical average.”
The federal funds rate is more likely to be limited by its effective lower bound than in the past.
“The Committee is ready to use its full range of tools to achieve its maximum employment and price stability goals.”
“The Fed is aware of the burden that could lead to higher prices for essential food items, but wants to prevent the unfavorable dynamics of the low inflation expectations seen in other countries.”
“A new statement reflects the Fed’s view that a robust labor market will not necessarily lead to unacceptable levels of inflation.”