Fed Announces Shift in Inflation Policy

It was widely expected (and generally thought to be the case anyway), but this morning at the annual Jackson Hole Economic Policy Symposium, Fed Chairman Powell made it official: The Fed will allow inflation to move moderately above its 2% target “for some time.” Historically, the Fed has hiked the overnight funds rate when core inflation threatened to rise above its 2% target. It’s been more than 12 years since core Personal Consumption Expenditures (PCE) has been above +2.1% on a year-over-year basis, and 28 years since it climbed above +3.0%.

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