Chair Jerome Powell announced this morning that the Fed will be adopting what he described as a “flexible form of average inflation targeting”, which we expect will trigger additional policy stimulus in the form of stronger forward guidance and possibly additional asset purchases too. But, with long-term interest rates already very low and the Fed still ruling out negative rates as undesirable, we don’t expect that additional stimulus to provide any significant boost to the real economy. That means the Fed might struggle to hit its 2% inflation rate at all, let alone deliver above-target inflation.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services