The United States central bank has shifted policy and now will let inflation rise to allow the economy to produce more jobs for the benefit of all workers, but especially lower-income families, Federal Reserve Chair, Jerome Powell said Thursday.
The aim is to correct the “shortfalls” in achieving the Fed’s goal of maximum employment, and a recognition that with changes in the global economy, a tight job market does not necessarily drive prices higher. Prior to the coronavirus pandemic the US unemployment rate had hovered near 50-year lows at 3.5 per cent, which brought many people back into the workforce as firms struggled to fill open positions.The policy shift, though telegraphed in recent statements, is a significant change for the Fed and central banking more generally, as inflation for decades has been the economic villain to be stamped out at every turn.
“This change may appear subtle, but it reflects our view that a robust job market can be sustained without causing an outbreak of inflation,” he told the virtual conference.