United States: Central Bank allows inflation to rise in favor of jobs

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The US Central Bank announced Thursday that it had changed its policy, now allowing inflation to rise to allow the economy to create more jobs for the greatest number and for low-income households in particular.

The change comes as the COVID-19 pandemic has plunged the world’s largest economy into recession. U.S. Gross Domestic Product contracted 31.7%, according to a second revised upward estimate released by the Commerce Department on Thursday.

Families with the lowest incomes are also those hardest hit by the economic crisis.

Concretely, changes to the Fed’s policy framework foresee that inflation can stay above the 2.0% target “for a while” before the Fed has to act by increasing interest rate, explained the president of the institution Jerome Powell in a speech.

The powerful financial institution noted that before the pandemic, relatively sustained growth and full employment did not rhyme with price increases: inflation remained moderate, below the Fed’s 2% target.

The boss of the Fed, who spoke at the annual meeting of central bankers in Jackson Hole (Wyoming), once again hammered that the institution was ready to use its entire “full range of tools” to support the economy.

“The economy is constantly evolving and the strategy of the FOMC (the Fed’s monetary committee deciding interest rates, editor’s note) to achieve its objectives must adapt to meet the new challenges that arise,” he said. he also explained.

As the country has been rocked for months by anti-racial protests and elected officials called on the Fed to do more for racial minorities, Jerome Powell countered that a “strong” job market could benefit ” many low and moderate income communities ”.

And, he added, “a robust labor market can be sustained without causing an unwanted rise in inflation.”

He finally recalled that before the pandemic, the unemployment rate was at its lowest level in 50 years (3.5% against 10.2% in July) and household incomes on the rise: the black and Hispanic minorities had took advantage of this favorable situation even if the gaps with the whites were still marked.

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