A Big Change In Fed Monetary Policy? Not Really


1. US Inflation Has Been Below Fed’s Target For Years

2. Fed Says Persistent Low Inflation is Bad For Economy

3. Why It Will Take More Than the Fed to Lift Inflation


The Federal Reserve convenes a major economic symposium in late August each year in Jackson Hole, Wyoming, the popular ski resort. Lots of Fed officials, banking big-wigs and other financial market players attend each year, along with a collection of media correspondents who pay thousands of dollars to be there.

This year, the symposium was conducted virtually, of course, without the attendees gathered in one or two fancy resorts in Jackson Hole -- and was available free online to the public for the first time -- not that anyone would have known how to access it. These annual gatherings often are the forum for Fed Chairpersons to make important policy announcements.

In this year’s speech by Fed Chairman Jerome Powell, he said the central bank will make a concerted effort to try to lift inflation at least to its 2% target, or maybe even a little higher just ahead. While short on details of how the Fed might make this happen, the Chairman did say short-term interest rates might remain near zero for several more years if needed.

The question is whether this is a significant change in Fed policy, and whether the Fed can actually do much to influence inflation higher. Today, I’ll argue that the answer to both questions is NO. And I’ll try to explain why the Fed wants higher inflation in the first place.