The #FOMC today began the process of “operationalizing” the average inflation targeting framework that Chair #Powell first laid out in his Jackson Hole, WY, Economic Policy Conference speech: including new guidance on how long #policy rates can be expected to remain near zero.
Specifically, policy #rates will remain at current levels “until #labor market conditions have reached levels consistent with the Committee's assessments of maximum #employment and #inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”
Still, we’re skeptical about the achievability of this #inflation goal when the #disinflationary influences of technological #innovation and the #demographic trend of #population aging arguably hold a greater impact on the rate of inflation than central bank #policy does.
Further, we question whether the endeavor of attempting to press #inflation higher is even a good thing for many lower- to middle-income U.S. households, as it could serve as a drag on net disposable #income, and more to the point on quality of life.
Essentially, excessive #inflation is a regressive #tax on spending power.
A preferred path might be a #policy cocktail that redefined the mandates around maximizing #growth and #employment, while also keeping #financial conditions on the rails.
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