Powell Says Fed Will Seek Inflation That Averages 2%

The transcript discusses the importance of maintaining inflation expectations at 2% to ensure effective economic policy. It highlights the risks of inflation consistently running below 2%, which could lead to lower expectations and realized inflation. To counter this, a new strategy aims to average 2% inflation over time, allowing for periods of inflation above 2% following downturns. This approach is flexible and not bound by a strict formula. The transcript also emphasizes readiness to act against excessive inflationary pressures.

Why is it important for long-term inflation expectations to remain anchored at 2%?

• To avoid deflation

• To guarantee economic growth

• To prevent inflation from averaging less than 2% over time

• To ensure inflation never exceeds 2%

What is the new approach to achieving the inflation target?

• Using a fixed mathematical formula

• Achieving an average inflation rate of 2% over time

• Allowing inflation to fluctuate freely

• Strictly maintaining inflation at 2%

How does the new inflation-targeting approach handle periods of low inflation?

• By ignoring them

• By aiming for inflation slightly above 2% afterwards

• By reducing interest rates

• By increasing taxes

What characterizes the new inflation-targeting approach?

• It is dictated by external factors

• It is based on historical data

• It is a flexible form of average inflation-targeting

• It is a rigid formula

What action will be taken if inflationary pressures exceed the target?

• The approach will be revised

• No action will be taken

• Immediate action will be taken to address it

• Inflation will be allowed to rise further