China News Service, New York, August 27. The Federal Reserve Chairman Jerome H. Powell said in an online seminar on the 27th that the Federal Reserve has adjusted its long-term inflation rate and other policies. aims. Media analysis believes that this means that the Fed will stop raising interest rates for a period of time to prevent excessive inflation.
On the same day, the Kansas City Federal Reserve Bank held an online seminar on the theme "Navigating the Next Decade: Impact on Monetary Policy". Powell video-linked and spoke at the meeting. He said that in the past few years, the unemployment rate in the United States has continued to fall, but the inflation rate has not risen as expected. This adjustment of policy objectives reflects the Fed’s new understanding in this regard that the job market can remain strong without triggering a rapid rise in inflation.
Before the outbreak of the new crown pneumonia epidemic, the unemployment rate in the United States had fallen for many years, reaching a historical low. According to the traditional view of the Federal Reserve, a decline in the unemployment rate will generally bring about significant inflation. However, in recent years, the long-term inflation rate in the United States has been lower than the 2% policy target set by the Federal Reserve for the most part.
The Fed announced the revision of its policy objectives that day. The Federal Reserve Open Market Committee unanimously agreed to amend the policy document "Statement on Long-term Goals and Monetary Policy Strategies" (hereinafter referred to as the "Statement"). In terms of the long-term inflation rate, the phrase "If the inflation rate continues to be higher or lower than the 2% policy target, the Fed will be concerned" was deleted and replaced with "The Fed tries to make the average inflation rate reach 2% over time. Therefore, when the inflation rate continues to fall below 2%, appropriate monetary policy should try to push the inflation rate above 2% within a period of time."
In terms of employment, the revised "Statement" stated that the Fed will "adjust its policy according to the shortfalls of the employment rate relative to its maximum value." Here, "gap" is used to replace the original "deviations." "New York Times" analysis believes that this shows that the Fed will not raise interest rates to cool the labor market in the future when the unemployment rate is falling.
The Fed stopped raising interest rates in 2019 and cut interest rates three times. After the outbreak of the new crown pneumonia in the United States in March this year, the Federal Reserve urgently reduced the Federal Reserve Funds interest rate to a level close to zero, and the United States has actually entered a period of "zero interest rate". The Associated Press stated that this revision of the "Statement" shows that the Fed is ready to withstand higher levels of inflation than before, and that the borrowing interest rates of American households and businesses will remain ultra-low in the next few years. (Finish)