Thank You Baker.

In major strategy overhaul, Fed opens door to higher inflation to pursue stronger recoveries

The Federal Reserve announced Thursday that it would temporarily allow inflation to run above target as needed to make up for periods of below-target inflation, a major change in strategy that is likely to result in looser money as a means of ensuring faster recoveries. The alteration of the central bank's long-term goals, a change a year in the making, reflects the Fed's experience with the recovery from the Great Recession. During that time, it saw unemployment fall lower than officials ever expected, without stoking the kind of inflation that would have been expected.

Consequently, the Fed will also take a broader view of its mandate to pursue "maximum employment," pursuing lower unemployment and underemployment as long as inflation doesn't result. The change "reflects our view that a robust job market can be sustained without causing an outbreak of inflation," Powell said in a speech announcing the changes in Jackson Hole, Wyoming. Before, the Fed had said that its strategy for inflation was to ensure that inflation was 2% over the long run. Now, it will aim to average 2%, meaning that if inflation comes in below 2% for a period of time, it will try to push up inflation above 2% for a similar duration. The goal is not to raise prices for consumers, but to ensure that the economy is operating at full potential. Previously, Fed officials, generally speaking, believed that low unemployment, representing an economy at operating at full potential, would translate to higher inflation. But they had to reconsider that premise as the past decade has seen inflation persistently below the Fed's 2% target, even as unemployment fell below 4%.

https://www.washingtonexaminer.com/policy/economy/fed-opens-door-to-higher-inflation-in-major-overhaul-of-strategy