08.04.20
Fed Weighs Abandoning Pre-Emptive Rate Moves to Curb Inflation
by: Nick Timiraos
The Federal Reserve is preparing to effectively abandon its strategy of pre-emptively lifting interest rates to head off higher inflation, a practice it has followed for more than three decades. Instead, Fed officials would take a more relaxed view by allowing for periods in which inflation would run slightly above the central bank's 2% target to make up for past episodes in which inflation ran below the target. The change being contemplated now is a way of essentially telling markets that rates will stay low for a very long time. Markets have likely already picked up on this change, given the continued declines in long-term interest rates. The changes on their own will do little to provide more support to the economy right now because investors already understand that the Fed isn't likely to raise interest rates for years, said Steven Blitz, chief U.S. economist at research firm TS Lombard. "It is a change at this point without meaning. It's just words," he asserted.
Read the full article on Wall Street Journal.