Xinhua
15 Sep 2020, 22:14 GMT+10
WASHINGTON, Sept. 15 (Xinhua) -- While U.S. Federal Reserve has adopted a new policy strategy on inflation, the central bank is unlikely to provide new forward guidance on short-term interest rates at its meeting this week, economists have said.
During the Kansas City Fed's annual Jackson Hole research conference held last month, Fed Chairman Jerome Powell announced that the central bank will seek to achieve inflation that averages 2 percent over time. The new strategy would allow a modest overshoot of inflation so as to trigger more "inclusive" employment and wage gains.
But Fed officials have yet to come to a consensus as to what an overshoot on inflation would actually look like since Powell's announcement, according to Diane Swonk, chief economist at Grant Thornton, a major accounting firm.
"They have not agreed on how high or how long an overshoot of the 2% target the Fed should actually tolerate," Swonk wrote Sunday in an analysis, adding the Fed is expected to ease its stance on inflation without fully defining what that new stance means.
Tim Duy, professor of the University of Oregon and a long-time Fed watcher, believed that the Fed will likely remain content to use the new strategy as justification for maintaining the current near zero rate path.
"The odds favor the Fed maintains the status quo at this week's meeting. It does not appear to have a consensus on enhancing forward guidance nor do I suspect FOMC (Federal Open Market Committee) participants feel pressure to force a consensus on that topic just yet," Duy wrote Tuesday in a blog post, referring to the Fed's policy-making committee.
"We had anticipated changes to forward guidance to occur at the September meeting but recent comments by Fed officials imply little urgency and a preference to wait for greater clarity about the outlook," echoed Ryan Sweet, an economist with Moody's Analytics.
"Therefore, we now anticipate the central bank to adopt outcome-based forward guidance in November," Sweet said.
Some Fed officials have said that there's no urgency for the central bank to update guidance on how long it will hold short-term interest rates near zero, as market participants understand the Fed won't raise rates any time soon.
"Market expectations are that rates will be low for a long period of time, and so I don't feel like there's a burning pressure that we need to change our forward guidance today to change market expectations," Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said in a recent interview with the Bloomberg Odd Lots podcast.
The Fed cut interest rates to near zero at two unscheduled meetings in March and began purchasing massive quantities of U.S. treasuries and agency mortgage-backed securities to repair financial markets. It also unveiled new lending programs to provide up to 2.3 trillion U.S. dollars to support the economy in response to the coronavirus outbreak.
The Fed is scheduled to release a policy statement and its updated quarterly forecasts for the U.S. economy Wednesday afternoon after wrapping up a two-day meeting.
"I suspect the overarching message from this meeting will maintain the theme that given the loss of fiscal support, the recovery is very fragile and dominated by downside risks such that they laugh at even the idea of thinking about raising interest rates," Duy said.
"Powell will underscore that additional aid from Congress is needed to ensure that the economy heals from the damage triggered by the pandemic," Swonk noted, adding the Fed's post-meeting statement is likely to reflect the concern that "the economy is losing momentum after the initial surge that followed lockdowns."
The U.S. economy grew modestly over the summer amid continued uncertainty about the pandemic and its negative effect on consumer and business activity, according to a Fed survey released earlier this month.
Economists have warned that the U.S. economy is at serious risk of sliding back into recession if the White House and Congress couldn't reach a deal on another fiscal rescue package in the coming months.
Get a daily dose of Manufacturing Mirror news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Manufacturing Mirror.
More InformationNew Delhi [India], July 2 (ANI): Union Minister of Communications Jyotiraditya Scindia slammed Congress President Mallikarjun Kharge...
Dehradun (Uttarakhand) [India], July 2 (ANI): Under the leadership of Chief Minister Pushkar Singh Dhami and Health Minister Dhan Singh...
New Delhi [India], July 1 (ANI): As the Digital India Mission completed 10 years on Tuesday, BJP leader Pradeep Bhandari drew contrast...
New Delhi [India], July 1 (ANI): Prime Minister Narendra Modi shared a blog titled 'A Decade of Digital India' on his official LinkedIn...
New Delhi [India], July 1 (ANI): Prime Minister Narendra Modi on Tuesday shared a detailed reflection on the completion of 10 years...
Jalalabad [ Afghanistan], June 30 (ANI/WAM): The UAE-funded maternity clinics are bringing hope to Afghan families. In Jalalabad, Nangarhar...
WASHINGTON, DC - U.S. President Donald Trump on Tuesday claimed Elon Musk's success has been built on government subsidies. Without...
New Delhi [India], July 1 (ANI): Yard 12652 (Udaygiri), the second ship of Project 17A stealth frigate, being built at Mazagon Dock...
Mumbai (Maharashtra) [India], July 1 (ANI): Tata Motors reported total sales of 2,10,415 units in the first quarter of FY26, marking...
New Delhi [India], July 1 (ANI): Bajaj Auto Limited reported nearly flat total sales for June 2025 on a year-on-year basis, as gains...
Hong Kong, July 1 (ANI): China's harsh treatment of ethnic minorities, such as Muslim Uyghurs in the northwest province of Xinjiang,...
Mumbai (Maharashtra) [India], July 1 (ANI): In the automotive segment, Mahindra recorded total vehicle sales of 78,969 units, marking...