While delivering his prepared remarks on Framework Review at the Thomas Laubach Research Conference on Thursday, Federal Reserve (Fed) Chairman Jerome Powell said that officials agree the strategic language around both shortfalls of employment and average inflation need to be reconsidered.
Key takeaways
“Fed is undertaking a two-day review of revisions to its framework adopted in 2020.”
“Framework needs to be robust to many circumstances, including a world where supply shocks may be more frequent and persistent.”
“April PCE likely around 2.2%.”
“Idea of a moderate overshoot of inflation following weakness became irrelevant given the levels inflation reached.”
“Revisions to Fed communications are also being considered.”
“Zero-lower bound still a risk and should be addressed in the framework, though it is no longer a base case given current level of policy rates.”
“Certain aspects of the Fed’s approach are permanent, such as the focus on inflation expectations.”
Market reaction
These comments don’t seem to be having a noticeable impact on the US Dollar’s valuation. At the time of press, the USD Index was down 0.23% on the day at 100.78.
