Fed asks about efforts to make sure "roof does not run"

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The & nbsp;Federal Reserve& nbsp; listens carefully to the recommendations to better fulfill its dual mandate: maximum employment and price stability, but expectations are moderate as to what the Fed could do at the end of its review process. "data-reactid =" 15 "> The Federal Reserve Government listens carefully to the recommendations to better fulfill its dual mandate: maximum employment and price stability, but expectations are moderate as to what the Fed could do at the end of its review process.

At a conference in Chicago, Fed officials heard from academics and other stakeholders with plenty of ideas to find the best way to adjust the central bank's monetary policy strategies. The review covered a lot of ground: how the central bank was aiming for its 2% inflation target, the measures it uses to gauge the maximum employment rate and policy tools available. "Unconventional" in the next crisis.

"When things are going well, you really need to make sure your roof does not run," Susan Collins, professor of public policy at the University of Michigan, told Yahoo Finance on Tuesday. "This public lecture is partly about it."

While there seems to be a lot of change on the table, some argue that the Fed may end up contenting itself with minor changes to the current monetary policy framework.

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The focus is particularly on the Fed's approach to inflation, in which the central bank has consistently underestimated the 2% inflation target that It had passed in 2012. Since then, reading basic personal consumption expenditure (the preferred reading of the Fed), has exceeded 2% once.

Policymakers have proposed variants of dynamic inflation targeting, ranging from a "nominal GDP targeting" strategy targeting spending levels to a temporary price targeting allowing the Fed to outperform the inflation target. inflation when interest rates are close to zero.

However, it is expected that the Fed will eventually adopt a less radical strategy: an average inflation targeting system in which the Fed would indicate its intention to target inflation above 2% to compensate for periods of inflation. is less than 2%.

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"In the end, we believe that this conference will generate a considerable amount of headlines, but the most likely impact will be a more in-depth review of the move to targeting average inflation," said Isaac Boltansky, from Compass Point, in a preliminary note of the conference, June 3. .

For his part, Powell lowered expectations of the degree of change expected in this review, stating in March that the process would more likely produce "evolution rather than revolution."

Deutsche Bank wrote on May 30 that it would qualify the magazine as "refining, rather than reinventing the wheel". They are even more skeptical about a change in approach to inflation than Boltansky, writing that they did not believe that the Fed would explicitly commit to compensating for a lack of inflation.

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Collins said that although the Fed listens to a wide variety of views, many potentially useful changes have been removed from the table.

An example: increase the 2% inflation target.

Some have criticized the 2% goal of being arbitrary, raising concerns that the Fed may have left too much room for price manipulation without providing evidence that 2% is the magic number

"Some of us think that it would be useful to be a little more daring," Collins told Yahoo Finance. Collins, however, said the Fed tended to refrain from making dramatic changes outside crises, when forced to do so.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A paper& nbsp; presented at the conference suggested an inflation target of 3%, for example. But the Fed has made it clear that it will maintain its target of 2% and instead modify its methodology to achieve this goal. "Data-reactid =" 42 "> A paper presented at the conference suggested an inflation target of 3%, for example, but the Fed made it clear that it would maintain its target of 2% and instead modify its methodology to achieve this goal.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The conference & nbsp;hosted a number of other documentss, some with more modest suggestions and others with more dramatic change proposals. For example, a discussion of the Fed's communications included a recommendation by Berkeley professor Berkeley Jón Steinsson to simply add a link to the Fed's annual statement on long-term goals to its meeting statements. setting up regular rules to remind market players of the short term. & nbsp;Yet another article on maximum employmentProfessors Katharine Abraham and John Haltiwanger from the University of Maryland invited the Fed to come up with a new way of measuring the labor market beyond the currently available statistics on unemployment and unemployment gaps. "data-reactid =" 43 "> a number of other documents, some containing more modest suggestions and others more radical proposals for change, such as a discussion on Fed communications, including a recommendation of Professor Jón Steinsson of the University of California, Berkeley, consisting simply of adding a link to the annual statement of the Fed Another article on the maximum employment of professors of the University of Maryland Katharine Abraham and John Haltiwanger challenged the Fed to come up with a comprehensive employment strategy – a new way of measuring the labor market beyond unemployment and the currently available unemployment gap.

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