Fed Chair Jerome Powell indicates in the Jackson Hole speech that the central bank is adopting a “flexible form of average inflation targeting”. That is, Fed would target to achieve inflation that “averages 2 percent over time”. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.
Dollar is sold off after as Powell deliver the speech. Markets see that Fed would keep monetary policy loose for longer, to allow inflation to overshoot 2%.
