Turning to the third question, how will the dynamics of a strong economy and supply constraints affect inflation? Inflation over the 12 months ending in April, as measured by the consumer price index (CPI), increased to 4.2 percent, the fastest pace in over a decade and up considerably from the 1.4 percent pace recorded at the start of the year. [...] The outlook for monetary policy As the pace and strength of the recovery unfolds, monetary policy settings remain highly accommodative and will remain so for some time in line with the FOMC’s forward guidance. [...] In this regard, the Federal Reserve’s revised framework for monetary policy, adopted last August, provides a “framework,” rather than a “rule.” The FOMC has in the past avoided strict adherence to monetary policy rules, so it is unsurprising that the revised framework is not a precise prescription for policy action even as it repositions the Federal Reserve’s approach to achieving its congressiona. [...] With a tremendous amount of fiscal stimulus flowing through the economy, the landscape could unfold quite differently than the one that shaped the thinking around the revised monetary policy framework. [...] That suggests remaining nimble and attentive to these dynamics will be important as we seek to achieve our policy objectives in the context of sustainable economic growth and the well-being of the American public.
- Pages
- 7
- Published in
- United States of America
