There Fed it could consider Tall rates longer To face any shock which will present themselves more frequently in the future. This was stated by the president of the US Central Bank, Jerome Powellsuggesting that zero rates policy is a distant memory. The number one of the Fed, reiterating the Focus on inflationhe also announced a new one change of strategy that the FOMC is evaluating.
Changed context: more volatile inflation and new shocks
“The economic context has changed significantly since 2020,” explained Powell, adding that “long -term interest rates are considerably higherlargely driven by Royal rates And from the stability of long -term inflation expectations “.
“Higher real rates – he added – could also reflect the Possibility that inflation can be more volatile In the future compared to the inter-crisis period of the years 2010. We could enter a period of More frequent offer shocks And potentially more persistent, a difficult challenge for the economy and central banks “.
Powell wanted to remember that the reference rate is “currently well above the lower limit”. And, “although being blocked at the lower limit is no longer the basic scenario, it is prudent that the reference framework continues to take into account this risk”.
Inflation has surprised in the last month
This week, just the data relating toinflation of April surprised positivelyindicating a slowdown higher than expectations. The tendential growth of prices has certified in fact to 2.3%, resulting in less than 2.4% of the previous month and expected by analysts. Parallel, the “Core” installmentsthat is, the price of consumer prices purified of the most volatile components such as food and energy, has been at 2.8% in line with the consensus.
Towards a change of the strategy
Powell then explained that the FOMC is engaged in discussions on what has been learned fromExperience of the past five years And it plans to complete its evaluation over the next few months. “We are paying particular attention to the changes of 2020, considering Discrete but important updates who reflect what we learned about the economy and the way these changes were interpreted by the public “.
Five years agothe Fed had slightly changed its strategy, showing one greater tolerance to periods of low unemployment and higher inflationthus compensating for low prices periods, as happened between 2010 and 2019. Then, the outbreak of the pandemic, the choke in the supply chains, the impact of the wars and – did not explicitly said it – the disturbance induced by the war of duties, have changed the perception of the bankers.
“In the discussions carried out so far, the participants have indicated that it would be appropriate to reconsider language relating to employment deficiencies“, Explained Powell, indicating that he is considering falling the automatism that reads low unemployment rates as a signal of increased inflationary risk.
“In addition to reviewing the declaration of consent, we will also consider potential improvements to our formal communications On policies, in particular as regards the role of forecasts and uncertainty, “concluded Powell, reiterating” the need to clear communications as complex events develop“, Given that” there is always a margin of improvement “in communication.
