ABSTRACT

Federal Reserve's Revised Monetary Policy Strategy Statement [September 10, 2020]   [open pdf - 805KB]

From the Document: "After a two-year 'Review of Monetary Policy Strategy, Tools, and Communications', the Federal Reserve (Fed) announced on August 27, 2020, revisions to its 'Statement on Longer-Run Goals and Monetary Policy Strategy'. This statement, initially published in 2012, explains the Fed's monetary policy strategy for achieving its statutory mandate of maximum employment, stable prices, and moderate long-term interest rates. The original statement had two key features. First, it set a long-run inflation goal of 2%, the first time the Fed formally specified a numerical goal. Second, it asserted that a similar numerical goal could not be set for maximum employment because of uncertainty surrounding full employment. The 2020 revision retains both features. Overall, the 2012 statement was concise and did not provide details on how the Fed would react to specific economic situations. The 2020 statement is more detailed, and it marks a shift on how monetary policy will respond to inflation and unemployment in light of recent macroeconomic developments. Specifically, since the 2007-2009 financial crisis, the federal funds rate has been close to zero, [...] and inflation has been mostly below 2% and relatively unresponsive to changes in the unemployment rate. Because the Fed cannot reduce rates below zero, its primary challenge since the crisis has been to provide adequate monetary stimulus to achieve its mandate. The 2020 statement articulates a strategy to provide greater stimulus."

Report Number:
CRS Insight, IN11499
Author:
Publisher:
Date:
2020-09-10
Copyright:
Public Domain
Retrieved From:
Congressional Research Service: https://crsreports.congress.gov/
Format:
pdf
Media Type:
application/pdf
URL:
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