FOMC voting member Brainard speaking
FOMC board of governor member Lael Brainard is speaking. She has cautionary comments about the economy saying:
- Important that Fed policy pivots to accommodation from stabilization in coming months
- US economy faces uncertainty, risks tilted to the downside
- Coronavirus is most important economic factor. Timing and size of fiscal support is also key
- New policy framework breaks ground puts Fed in a stronger position to support recovery
- If new framework had been in place several years ago, job gains would have been bigger
- New framework means Fed will not preemptively withdraw support
- Underlying trend of inflation is below Fed's 2% goal
- Mechanical average inflation target would be difficult to explain and implement
- Reviewing framework every 5 years can provide insight into appropriate makeup period for inflation
Last week, chair Powell presented the new framework for the Fed which would rely on the average inflation rate around the 2% level. This implies that the Fed would tolerate inflation above 2% if the average was while the low for an extended period of time (like it has been).
