August 27, 2020
St. Louis Fed President James Bullard shared his views on the changes to the Fed’s monetary policy framework during an interview on “Bloomberg Markets.” The Federal Open Market Committee (FOMC) announced the updates to its Statement on Longer-Run Goals and Monetary Policy Strategy earlier in the day, and Fed Chair Jerome Powell discussed them during a speech.
For example, the statement notes that the FOMC seeks to achieve inflation that averages 2% over time. Bullard described how, in the FOMC’s judgment, it would be wise to allow inflation to be above target for some time to make up for past misses to the low side. This would cement market expectations at 2% inflation and would ensure credibility for the Fed’s 2% inflation target.
During the interview, Bullard also discussed updated language about maximum employment, which, along with stable prices, is part of the Fed’s mandate; how the policy rate being at the “effective lower bound” is pulling average inflation down; the economy of the St. Louis Fed’s district; and expectations for the U.S. unemployment rate.
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