Economics
Fed Paves Way for Low-Rate Era With Inflation Able to Run Higher
- New approach would tolerate prices overshooting 2% goal
- Fed to look at shortfalls on employment rather than deviations
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Federal Reserve Chair Jerome Powell unveiled a new approach to setting U.S. monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come.
Following a more than yearlong review, Powell said Thursday that the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness. It also adjusted its view of full employment to permit labor-market gains to reach more workers.