New York Fed President John Williams said Fed’s new framework statement “directly and effectively addresses the problems caused by a low neutral rate and persistently low inflation.”
“First, it stipulates that, following periods when inflation has been running persistently below 2 percent, a temporary overshooting of the longer-run inflation target will likely be desirable to keep inflation and inflation expectations centered on 2 percent.
“Second, it makes clear that we seek inflation that averages 2 percent over time, consistent with our longer-run target.
“Finally, the statement makes unequivocally clear that we seek maximum employment and will aim to eliminate shortfalls from this broad and inclusive goal. These changes are mutually reinforcing and will meaningfully improve our ability to achieve both of our dual mandate goals in an environment of a very low neutral rate.”
