Robert Kaplan, President of the Dallas fed, said the Fed may now allow inflation to rise above the 2% target if it used to be below that target.
Kaplan said in an online event at Dallas Friday: “I would like to see inflation remain slightly above 2% for some time after inflation continues to be below 2%
Kaplan said he was satisfied with inflation at around 2.25% or 2.375%. The average inflation rate target is different from the current policy mechanism of the Federal Reserve to maintain price stability. The latter is that no matter what happened in the past, the inflation rate must be targeted at 2%.
after the inflation rate in the last recovery period continued to be difficult to reach 2%, the Federal Reserve began to evaluate the policy framework last year. At a news conference on July 29, Federal Reserve Chairman Jerome Powell said the discussions would end “in the near future.”.
he said, “I am not promising what we must do. Basically, I am proposing a trend or possibility. The specific implementation depends on the situation. We must adapt to these external conditions. I am very sure that the environment we are facing is different from that before the outbreak of the epidemic.”.
Kaplan said the Federal Reserve has made clear what monetary policy will look like in the next two years, and interest rates are likely to remain near zero unless there is any economic accident. Powell once said that the Fed “didn’t even think about raising interest rates.”.
Kaplan said that if the current crisis continues and the virus does not stop spreading, more small businesses may fail. A new round of “pay protection plan” (PPP) may be needed.
so far, there are few participants in the Federal Reserve’s mass commercial loan program, because medium-sized enterprises with high risk cannot meet the credit requirements for participating in the program. Kaplan said the leadership of the Federal Reserve and Treasury is continuing to discuss the plan.
Kaplan forecasts that the U.S. economy will grow at an annualized rate of 32.9% in the second quarter, 20% in the three months to September 30, and 6% to 7% in the last quarter. He said that the economic recovery has stagnated due to the rebound of the epidemic situation. Compared with “V”, the recovery pattern looks more like a “check mark”. The economy is expected to shrink by 4.5% in 2020 compared with the previous year.