Home ETF News “Patience” May Be Replaced by “Flexible” as the Fed Debates Inflation

“Patience” May Be Replaced by “Flexible” as the Fed Debates Inflation

by Iris.xyz

Fed Chair Powell gave his semi-annual testimony to Congress last week to present an assessment of the current state of the U.S. economy.

To summarize his views, economic growth remains steady, the labor market remains strong and inflation is well contained. However, downside risks are visible, particularly those from what is becoming a pronounced slowdown in overseas economies, which has the potential to dent growth here at home. As such, the FOMC is committed to patience before raising the Fed Funds Rate in 2019 after hiking rates four times last year.

The word “patience” has become the most popular way to describe the Fed this year, but we would argue “flexible” may take the top spot moving forward. This is because Powell, along with a host of other committee members in recent weeks, has begun to highlight the months-long review of its policy framework, which appears to be centered around the current inflation target of 2%. The formal inflation target of 2% was introduced in 2012, but inflation has generally remained below that since the financial crisis.

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