Respondents had somewhat contradictory reactions to the Fed’s new longer-run strategy.
More than 60% said they agreed or strongly agreed that the new approach would enhance the Fed’s ability to achieve its objectives. A majority also said the new strategy would help, over time, lower the gap between Black and White unemployment levels in the U.S.
Despite those positive reactions, most economists said the shift had not prompted them to revise their expectations for future inflation, unemployment or interest rates. More than 70% also said they didn’t expect the Fed to achieve its new 2% average inflation target until 2024 or later, though one respondent noted reaching that milestone would rely on more than just monetary policy.
“It will take a while to create inflation where none exists, and it will take some level of consistent policy -- fiscal and monetary -- to accomplish it,” said Stephen J. Taddie, partner at HoyleCohen, LLC.
Asked to rate the level of risk associated with potential unwanted consequences from the strategy shift, respondents pointed decisively to financial bubbles, with 34 out of 37 rating the risk as “moderate” or “high.”
This article was provided by Bloomberg News.