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MNI BRIEF: Fed Gov Waller: Covid-Era Guidance Too Restrictive

(MNI) WASHINGTON

The Fed's forward guidance on when it would begin tightening policy as the U.S. economy recovered from Covid-19 was perhaps too "constraining," Federal Reserve Governor Christopher Waller and Board of Governors economist Jane Ihrig said in an academic note published Wednesday.

The FOMC in December 2020 laid out guidance that the Fed would keep buying USD120 billion per month in securities "until substantial further progress has been made" toward maximum employment and stable prices and would keep rates near zero until "labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time." (See: MNI: Fed Review To Rebalance Inflation Target-Ex-Officials)

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The Fed's forward guidance on when it would begin tightening policy as the U.S. economy recovered from Covid-19 was perhaps too "constraining," Federal Reserve Governor Christopher Waller and Board of Governors economist Jane Ihrig said in an academic note published Wednesday.

The FOMC in December 2020 laid out guidance that the Fed would keep buying USD120 billion per month in securities "until substantial further progress has been made" toward maximum employment and stable prices and would keep rates near zero until "labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time." (See: MNI: Fed Review To Rebalance Inflation Target-Ex-Officials)

Keep reading...Show less