Powell set to deliver 'profoundly consequential' speech, changing how the Fed views inflation
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  Powell set to deliver 'profoundly consequential' speech, changing how the Fed views inflation
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Author Topic: Powell set to deliver 'profoundly consequential' speech, changing how the Fed views inflation  (Read 1849 times)
brucejoel99
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« on: August 24, 2020, 03:49:13 PM »

https://www.cnbc.com/2020/08/24/powell-set-to-deliver-profoundly-consequential-speech-changing-how-the-fed-views-inflation.html

Quote
  • Fed Chairman Jerome Powell [will] speak Thursday during a virtual version of the Fed's annual Jackson Hole, Wyoming conference.
  • He is expected to outline what could be the central bank's most active efforts ever to spur inflation back to a healthy level.
  • "Average inflation" targeting means the Fed will allow inflation to run higher than normal for a period of time.
  • The effort will be the reverse of former Fed Chairman Paul Volcker's rate hikes instituted to quash inflation in the 1980s.

Exciting!
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Frodo
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« Reply #1 on: August 27, 2020, 06:04:38 PM »

Fighting inflation is no longer top priority:

Federal Reserve announces significant change for rates to stay near zero even after inflation picks up

Quote
The Federal Reserve announced a significant change Thursday in how it manages interest rates by saying it plans to keep rates near zero even after inflation has exceeded the Fed’s 2% target level.

The change signifies that the Fed is prepared to tolerate a higher level of inflation than it generally has in the past. And it means that borrowing rates for households and businesses — for everything from auto loans and home mortgages to corporate expansion — will likely remain ultra-low for years to come.

The new goal says that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”

The new Fed policy sought to underscore its belief that a low jobless rate was good for the economy by saying it would seek to assess the “shortfalls” in employment from the maximum level.
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brucejoel99
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« Reply #2 on: August 27, 2020, 06:12:43 PM »

This is honestly a long time coming. Fiscal stimulus is preferable since it's less conducive to speculation & bubbles, but this is a good step in acknowledging that we can accept some inflation.
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World politics is up Schmitt creek
Nathan
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« Reply #3 on: September 17, 2020, 09:18:29 AM »

My understanding is that a fixation on keeping inflation down is necessarily also a fixation on keeping wages down, since higher wages (and thus higher consumer prices) drive inflation, so I think this is a good thing even if the real motivation is almost certainly to keep roiding up the Dow.
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Tintrlvr
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« Reply #4 on: September 17, 2020, 09:51:39 PM »

While the Fed has been letting inflation undershoot their targets for a long time, I wonder whether low inflation was precisely because of Fed policy's focus on combating inflation. That is, inflation was low because the market expected the Fed to step in to slow down the economy if inflation got too high. That would imply that inflation will now increase (even without the economy surging, necessarily) because the markets will no longer expect anti-inflation interventions to be as harsh or as frequent.
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Kingpoleon
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« Reply #5 on: September 20, 2020, 01:56:30 PM »

I fundamentally disagree. The economy should become more and more efficient, using saved money to keep prices low and to raise wages. The Fed’s decision to raise prices is fundamentally harmful to poor people, whose wages will never realistically do better than inflation.
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Devout Centrist
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« Reply #6 on: September 22, 2020, 07:38:07 PM »

I fundamentally disagree. The economy should become more and more efficient, using saved money to keep prices low and to raise wages. The Fed’s decision to raise prices is fundamentally harmful to poor people, whose wages will never realistically do better than inflation.
No one's saving money right now. Hardly anyone was saving money before the recession either...
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #7 on: September 22, 2020, 08:13:24 PM »

I fundamentally disagree. The economy should become more and more efficient, using saved money to keep prices low and to raise wages. The Fed’s decision to raise prices is fundamentally harmful to poor people, whose wages will never realistically do better than inflation.
No one's saving money right now. Hardly anyone was saving money before the recession either...

Actually, the savings rate has gone up. People who have income are on average more concerned about their future income and saving for the future rather than assuming their income will monotonically increase.
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Devout Centrist
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« Reply #8 on: September 22, 2020, 08:58:14 PM »

I fundamentally disagree. The economy should become more and more efficient, using saved money to keep prices low and to raise wages. The Fed’s decision to raise prices is fundamentally harmful to poor people, whose wages will never realistically do better than inflation.
No one's saving money right now. Hardly anyone was saving money before the recession either...

Actually, the savings rate has gone up. People who have income are on average more concerned about their future income and saving for the future rather than assuming their income will monotonically increase.
I understand the savings rate dramatically increased after the stimulus, but I'm more concerned about how much people will save going forward. The sunsetting unemployment benefits don't help either.

People are going to save what they can during a recession, but I'm not sure that we're going to see the savings rate improve much in 2021.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #9 on: September 23, 2020, 08:22:14 AM »

I fundamentally disagree. The economy should become more and more efficient, using saved money to keep prices low and to raise wages. The Fed’s decision to raise prices is fundamentally harmful to poor people, whose wages will never realistically do better than inflation.
No one's saving money right now. Hardly anyone was saving money before the recession either...

Actually, the savings rate has gone up. People who have income are on average more concerned about their future income and saving for the future rather than assuming their income will monotonically increase.
I understand the savings rate dramatically increased after the stimulus, but I'm more concerned about how much people will save going forward. The sunsetting unemployment benefits don't help either.

People are going to save what they can during a recession, but I'm not sure that we're going to see the savings rate improve much in 2021.

Most people are grasshoppers not ants. In any case, under normal economic circumstances, the primary concern shouldn't be the savings rate per se, but the amount of income people have after meeting basic needs. You need to have that before you can even begin to save. The problem is that a high savings rate often leads to a weak domestic economy. Its only macroeconomic benefit is in providing a cheap source of capital to domestic industries that produce exported goods, assuming that capital outflows are restricted.
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Kingpoleon
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« Reply #10 on: September 23, 2020, 11:17:02 AM »

Most people are grasshoppers not ants. In any case, under normal economic circumstances, the primary concern shouldn't be the savings rate per se, but the amount of income people have after meeting basic needs. You need to have that before you can even begin to save. The problem is that a high savings rate often leads to a weak domestic economy. Its only macroeconomic benefit is in providing a cheap source of capital to domestic industries that produce exported goods, assuming that capital outflows are restricted.
My words have been misunderstood. Saved money was not referring to money saved by consumers, but to money saved by producers due to higher rates of economic efficiency. Hence why such money could be used by said producers to raise wages at a faster rate than prices.
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weatherboy1102
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« Reply #11 on: September 23, 2020, 10:44:57 PM »

translation: haha money printer go brrr
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