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Fed doubles down on pretending inflation isn't already far above 'target'
Federal Reserve Considers Letting Inflation Run Above Target
By Brendan Greeley
Financial Times, London
Monday, December 2, 2019
The Federal Reserve is considering introducing a rule that would let inflation run above its 2 percent target, a potentially significant shift in its interest rate policy.
The Fed's year-long review of its monetary policy tools is due to conclude next year and, according to interviews with current and former policymakers, the central bank is considering a promise that when it misses its inflation target, it will then temporarily raise that target, to make up for lost inflation.
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The idea would be to avoid entrenching low U.S. price growth which has consistently undershot its goal.
If the Fed adopts this so-called "make-up strategy," it would mark the biggest shift in how it carries out its interest rate policy since it began to target 2 percent inflation in 2012.
Policymakers are frustrated by the failure of prices to hit their target even as U.S. unemployment has plumbed 50-year lows.
The new policy would require "making it clear that it's acceptable that to average 2 percent, you can't have only observations that are below 2 percent," Eric Rosengren, president of the Federal Reserve Bank of Boston, said in an interview with the Financial Times last week. ...
... For the remainder of the report:
https://www.ft.com/content/b07f7354-1165-11ea-a7e6-62bf4f9e548a
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