Powell warns that the economy may face more “show shocks”

Federal Chairman Jerome Powell He said on Thursday that the central bank’s framework for monetary policy determination may be amended to calculate the possibility that the shocks of the show becomes more common given the difficulties they offer to policy makers.

Powell made notes in Federal Reserve The Thomas Lubbash Research Conference said that the central bank policy – the target range of the standard federal funds – could be higher in the future due to the possibility of fluctuations with inflation and supplies that often occur.

Powell said: “There have been increased many estimates of the long -term level of the policy rate, including those in the summary of economic expectations,” Powell said. “The highest real rates may also reflect the possibility that inflation will be more volatile to move more than the crisis period in 2010.”

The president added: “We may enter a period of the shocks of the show more frequent and perhaps more stable – is a difficult challenge to the economy and central banks.”

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Powell pointed out that the price of the Federal Reserve Policy currently exceeds the “minimum” to reduce the policy rate to zero – and it is currently sitting in the range of 4.25 % to 4.5 % – and that the central bank has historically made significant discounts during stagnation times.

“While our policy rate is much higher than the minimum, in recent decades, we have reduced the rate by about 500 basis points when they are Economy in stagnation. Although stumbling in the minimum is no longer the basic state, it is wise for the frame to continue to address this danger. “

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The Federal Reserve and other central banks face restrictions in policy -making when the policy rate is near zero, because it denies its ability to reduce interest rates to Economy stimulation Amid shrinkage.

Powell also discussed how to maintain long -term Inflation The decree will remain in the goal of the Federal Reserve by 2 %, an essential part of the policy framework at the Federal Reserve, saying that although some of its aspects “must develop, some of its elements are immortal.”

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He pointed out that its importance became clear during the great inflation, from the 1960s to 1982, and that it helped enhance the great moderation in the mid -1980s to the middle of 2000 when there was a relatively low economic fluctuation.

“Politics makers have come out of great inflation with a clear understanding that it is necessary to consolidate inflation forecasts at an appropriate low level,” Powell explained. “During the great moderation, we allowed us to do well -fulfilling inflation to provide policy support without risking to destabilize inflation.”

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“Since the great inflation, the American economy had three of the longest four expansions ever. The focused expectations have played a major role in facilitating these expansions. Recently, without that bodies, it was not possible to achieve approximately 5 percentage of inflation without rise in unemployment,” he noted Powell. “