Fed tweaks strategy, will allow inflation to run above 2% target

Payne: Fed’s Powell had an epiphany about inflation

FOX Business’ Charles Payne argues Federal Reserve Chair Jerome Powell’s attitude and actions toward inflation have changed the course of the Federal Reserve.

The Federal Reserve unanimously approved changes to its long-term goals and monetary policy strategy that will allow inflation to average 2%.

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The updated framework will allow inflation to run moderately above its 2% target "for some time" following periods of price growth persistently below that mark. The central bank will also make policy decisions based on the size of the unemployment shortfall versus a "deviation."

The changes will help the central bank more easily adapt to new challenges facing the U.S. economy and better achieve its dual mandate of price stability and maximum employment.

“Our revised statement reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities, and that a robust job market can be sustained without causing an unwelcome increase in inflation," said Federal Reserve Chairman Jerome Powell.

The central bank will no longer raise interest rates following a drop in unemployment to preemptively stamp out a rise in inflation, a practice that has been in place for decades.

The new strategy is an acknowledgment that the Phillips Curve, which suggests economic growth brings inflation and therefore more jobs and lower unemployment, is dead.

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