Report: The Federal Reserve to adopt multi-year pro-inflation policy

In the next few months, the Federal Reserve will be solidifying a policy outline that would commit it to low rates for years as it pursues an agenda of higher inflation and a return to the full employment picture that vanished as the coronavirus pandemic hit.

Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.

To achieve that goal, officials would pledge not to raise interest rates until both the inflation and employment targets are hit. With inflation now closer to 1% and the jobless rate higher than it’s been since the Great Depression, the likelihood is that the Fed could need years to hit its targets.

The policy initiatives could be announced as soon as September. Addressing the issue last week, Fed Chairman Jerome Powell said only that a year-long examination of policy communication and implementation would be wrapped “in the near future.” The culmination of that process, which included public meetings and extensive discussions among Fed officials, is expected to be announced at or around the Federal Open Market Committee’s meeting.

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Meanwhile gold hit a new record high today, closing up more than 2% at $2036/oz.