In 2020, the Fed introduced a new framework – the Flexible Average Inflation Targeting (FAIT) framework. It is now largely considered to be a flop:
Powell Plans U-Turn on an Economic Strategy That Soured by Nick Timiraos
The Fed unveiled a strategy five years ago for worries that the economy outgrew. Now, it will formally reset.
https://www.wsj.com/economy/central-banking/fed-jerome-powell-strategy-change-6fab8188
Powell Plans U-Turn on an Economic Strategy That Soured by Nick Timiraos
The Fed unveiled a strategy five years ago for worries that the economy outgrew. Now, it will formally reset.
https://www.wsj.com/economy/central-banking/fed-jerome-powell-strategy-change-6fab8188
Fed Officials Erase Old Policy That Tolerated Higher Inflation
https://www.wsj.com/economy/central-banking/fed-officials-erase-old-policy-that-tolerated-higher-inflation-7636e3ee
The central bank retired a previous strategy and on Friday unveiled a new approach that updates how inflation and employment are balanced.
As far back as September 2020, I argued that adoption of the FAIT framework was a mistake:
Will the Fed’s recasting of its monetary policy strategy help the US economy? BY Vivekanand Jayakumar, The Hill - 09/01/20
https://thehill.com/opinion/finance/514624-will-the-feds-recasting-of-its-monetary-policy-strategy-help-the-us-economy/
In Feb 2021, I again critiqued Fed actions during the pandemic era:
Have misguided policies led to recent asset bubbles and boom-bust cycles?
BY Vivekanand Jayakumar, The Hill - 02/16/21
https://thehill.com/opinion/finance/538921-have-misguided-policies-led-to-recent-asset-bubbles-and-boom-bust-cycles/
An added risk in the current cycle is that surging asset prices combined with unprecedented fiscal and monetary largesse may finally cause inflation to emerge from its long dormancy. Standard inflation measures often fail to properly account for early signs of pricing pressures. By having overcommitted to its easy policy stance, the Federal Reserve will find it hard to change direction in the future without creating significant financial market upheaval.
https://www.wsj.com/economy/central-banking/fed-officials-erase-old-policy-that-tolerated-higher-inflation-7636e3ee
The central bank retired a previous strategy and on Friday unveiled a new approach that updates how inflation and employment are balanced.
As far back as September 2020, I argued that adoption of the FAIT framework was a mistake:
Will the Fed’s recasting of its monetary policy strategy help the US economy? BY Vivekanand Jayakumar, The Hill - 09/01/20
https://thehill.com/opinion/finance/514624-will-the-feds-recasting-of-its-monetary-policy-strategy-help-the-us-economy/
Have misguided policies led to recent asset bubbles and boom-bust cycles?
BY Vivekanand Jayakumar, The Hill - 02/16/21
https://thehill.com/opinion/finance/538921-have-misguided-policies-led-to-recent-asset-bubbles-and-boom-bust-cycles/
An added risk in the current cycle is that surging asset prices combined with unprecedented fiscal and monetary largesse may finally cause inflation to emerge from its long dormancy. Standard inflation measures often fail to properly account for early signs of pricing pressures. By having overcommitted to its easy policy stance, the Federal Reserve will find it hard to change direction in the future without creating significant financial market upheaval.