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Goldman Sachs note that "Fed Chair Powell announced the results of the central bank's long-running framework review at this year's Jackson Hole research conference. The FOMC revised its official statement on policy goals, saying it will now aim to achieve an average inflation rate of 2%, partly by aiming above 2% following periods when inflation has fallen short of that goal. Inflation in the Fed's preferred measure has averaged only 1.5% over the last decade, and high unemployment should keep price pressures relatively low over the near-term. Therefore, unless the economy rebounds much more rapidly than expected, the new policy framework effectively commits the Fed to a very long period of near-zero policy rates, negative real interest rates, and a large balance sheet. This should reinforce ongoing depreciation in the US Dollar. Over the short-term Dollar trends will likely be driven by covid developments in the US and continental Europe, polling related to the US election (with a tighter race likely supporting the Dollar on the margin), and fund flows, which have increasingly favored non-US assets."
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