We kind of assumed they would have to keep rates low, but now it’s official:
The Federal Reserve announced a major policy shift Thursday, saying that it is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy.
In a move that Chairman Jerome Powell called a “robust updating” of Fed policy, the central bank formally agreed to a policy of “average inflation targeting.” That means it will allow inflation to run “moderately” above the Fed’s 2% goal “for some time” following periods when it has run below that objective.
The changes were codified in a policy blueprint called the “Statement on Longer-Run Goals and Monetary Policy Strategy,” first adopted in 2012, that has informed the Fed’s approach to interest rates and general economic growth.
“Many find it counterintuitive that the Fed would want to push up inflation,” Powell said in prepared remarks. “However, inflation that is persistently too low can pose serious risks to the economy.”Link to CNBC Article