Federal Reserve Chairman Yellen said last month that the “high-handed economy” could help to eliminate some of the economic damage caused by the Great Recession, but she did not suggest the Fed would be willing to allow inflation to 2% target above the Fed’s expectations Suggesting a similar strategy.
Janet Yellen, chairman of the Federal Reserve, said last month that a “high-pressure economy” could help eliminate some of the economic damage caused by the Great Recession. The remarks in the market aroused discussion.
Some investors are trying to figure out whether the Fed is seeking to push inflation above 2%. Speaking on the same day, Bank of England Governor Mark Carney said the bank was willing to let the inflation rate temporarily exceed the 2% target to prevent a substantial increase in unemployment.Three weeks ago, the Bank of Japan also said it intends to let the inflation rate of more than 2% of the target.
However, Yellen did not suggest the Fed will follow suit, the Federal Reserve did not suggest a similar strategy is expected.
She was in fact expressing her acceptance of the idea that short-term interest rates and unemployment rates could be temporarily maintained at low levels to assess economic gains and losses. According to the Federal Reserve’s expectations, this may lead to accelerated inflation, but not more than 2%. The United States has more than four years of inflation below this level.
Her comments reflected divergent views of Fed officials over a two-day meeting that ended Wednesday. Federal Reserve officials may maintain the benchmark federal funds rate in the 0.25% -0.5% range, and hinted that may raise interest rates next month.
Some officials argue that interest rates should continue to be kept low and that the unemployment rate (5% in September) should decline further, and that they hope this will begin to expand from economic expansion, including among African-Americans and Hispanics Benefiting the population to create more employment and economic benefits.
Other officials argued that the Fed should raise interest rates before they warned that the unemployment rate is too low may lead to rising prices, which forced the Fed to hurry to raise interest rates, which in turn will lead to economic recession. The officials say the situation is hurting those in favor of colleagues who want to help lower interest rates.
Fed officials do not know exactly how much unemployment can fall below the inflation rate before it rises sharply. If they allow the unemployment rate to fall to 4.5 percent, and inflation does not begin to rise, officials will understand that they may be able to push the unemployment rate down further without stimulating inflation.
Federal Reserve Bank of San Francisco Governor John Williams said last week he did not think there was anything wrong with a little overheating, and he said the inflation rate was a little over 2%. But none of the Federal Reserve officials, except Chicago’s Federal Reserve Bank governor Charles Evans, who previously said the inflation rate should be above 2% for half the time and less than 2% for the other half, Called inflation rate exceeded the target.
“It’s a totally different strategy,” Williams said, as it intends to let inflation go beyond the target and try to counteract the “default” (which had not been met for years after inflation).
He said that this strategy may have some benefits, but not the Fed officials pursued.
