Fed Powell speaking at Princeton
- Fed not tied to a set formula for inflation target
- To achieve inflation of 2% need to see inflation average 2%
- Will tolerate inflation over 2% to get the average to 2%
- flexible average inflation targeting means we have not tied ourselves to mathematical formula
- we want inflation expectations while anchored at 2%
- since we announced framework, there is evidence market participants have shifted expectations to be consistent with guidance
- will need to see inflation rise above 2% for a time for a new framework to be credible to the public
- Will not raise rates to ward off theoretical threats of inflation, imbalances.
- In near term as pandemic recedes it could be exuberant spending, upward pressure on prices
- One time rising prices won't mean persistent inflation
- We are long way from maximum employment
- there is a shortage of demand globally
- If inflation were to move up in ways that were unwelcome, Fed has tools for that and will use them
