Federal Reserve's inflation target fudge: what it means for Australians
4 years, 3 months ago

Federal Reserve's inflation target fudge: what it means for Australians

ABC  

Late last week, the chairman of the US central bank announced major changes to the way the US will be targeting inflation in coming years. Instead of trying to keep inflation around 2 per cent by lowering or raising interest rates, Fed chairman Jerome Powell said the US central bank might let things run a bit hot for a while as the economy bounces back from coronavirus. Joe Capurso, Commonwealth Bank's head of international economics, says his team thinks the range for the dollar's "fair value" is somewhere between 71 and 82 US cents, centring around 76. Interest rates and house prices The US Federal Reserve's decision to keep interest rates lower for longer to encourage inflation to lift above 2 per cent — and to remain above 2 per cent for years — also has implications for Australia's Reserve Bank. Share markets and super funds The US Federal Reserve's decision to allow inflation to run above 2 per cent in the future will add support to US equity prices and, because of the primacy of the US economy and currency, to many share markets around the world, including our own.

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