Federal Reserve Chair Jerome Powell announced a new approach to policy Thursday that takes a more relaxed stance on inflation and on its view of how low U.S. unemployment can go.
Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for periods of overshoots. Its shift on maximum employment will allow labor-market gains to run more broadly.
"The maximum level of employment is a broad-based and inclusive goal," Powell said in a speech delivered virtually for the central bank's annual policy symposium traditionally held in Jackson Hole, Wyoming. "This change reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities."
During the longest U.S. economic expansion on record until the pandemic hit earlier this year, many groups benefited _ including minorities and women _ in their ability to find work. With unrest breaking out across the U.S. over racial inequality, questions about how the Fed's policy helps communities broadly have been raised.
In its new statement on longer-run goals, the Fed said its decisions would be informed by its assessment of "shortfalls of employment from its maximum level." The previous version had referred to "deviations from its maximum level." The change de-emphasizes previous concerns that low unemployment can cause excess inflation.
Regarding price pressures, the document says the committee will target "inflation that averages 2% over time" and will aim to bring inflation above the 2% target following periods when inflation runs below that level.
Powell called the changes "a robust updating of our monetary policy framework."
