Minutes from the Fed’s July policy meeting due for release Wednesday are likely to shed more light on how, exactly, central bank officials will wrap their yearlong strategy review.
The most visible changes resulting from the review are likely to be enshrined in the Fed’s statement on longer-run goals and monetary policy strategy, a constitutional document adopted in January 2012 that is traditionally approved at the start of every year.
Fed Chairman Jerome Powell and other central bank leaders have indicated they are preparing to finalize a policy shift in which they will seek to make up for periods of low inflation with periods of somewhat higher inflation. The practical effect of all this is that it will be a long time before the Fed raises interest rates.
Officials began the review animated by concerns that the inflation framework that has guided their rate strategy for the last three decades needs to be updated for a world in which the biggest challenge isn’t the runaway inflation of the 1970s but rather the difficulty of setting policy when interest rates can’t be cut.
It’s an open question how much clarity the minutes will provide on any forthcoming changes regarding the Fed’s guidance about interest rates and asset purchases, which some analysts believe would help reinforce with concrete actions any change in strategy.
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August 18, 2020 at 04:30PM
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Timiraos’s Take: Fed Minutes Should Clarify Strategy Review Endgame - Wall Street Journal
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