May rework 2020 Fed framework language: Powell

A consideration in 2020 was keeping Americans' long-term expectations for inflation close to 2%, Powell said

- Bloomberg

Federal Reserve chair Jerome Powell said policymakers are weighing changes to key parts of the framework that guides their monetary policy decisions, including how they think about shortfalls in US employment and approach their inflation target.

The Fed in 2020 revamped its approach to steering the economy in two important ways: After periods when inflation ran persistently below 2%, they would allow it to rise moderately higher for "some time." They also signaled they wouldn't preemptively raise interest rates during periods of low unemployment to head off potential inflationary pressures, an effort to mitigate "shortfalls" from their maximum employment goal.

Officials have indicated that they thought it would be appropriate to reconsider the language around shortfalls. And at our meeting last week, we had a similar take on average inflation targeting," Powell said Thursday at a research conference on the Fed's monetary policy framework.