Clarida Says Fed Won't Consider Raising Rates Until Inflation Hits 2%

The video discusses the goals of maximum employment and price stability, defined as 2% inflation in the long run. It highlights the challenges posed by low policy rates, which create a downward bias on inflation and an upward bias on unemployment. To address these, the video explains the need for a flexible approach to monetary policy, allowing inflation to fluctuate around 2% to anchor expectations. Forward guidance is provided, indicating that interest rates will remain low until maximum employment and 2% inflation are achieved. The video also emphasizes the importance of observable metrics for determining when to adjust rates.

What indicators are mentioned that will signal when to lift off from the current interest rates?

What is the significance of observing inflation at 2% in the context of monetary policy?