Despite a U.S. labor market that has been 'nothing short of extraordinary,&...
SAN FRANCISCO - Despite a U.S. labor market that has been “nothing short of extraordinary,” the Federal Reserve is falling short on its 2-percent inflation goal, undermining the U.S. central bank’s credibility and undercutting its ability to make effective monetary policy, San Francisco Fed Bank President Mary Daly said on Tuesday.
Low inflation makes the chance of an outright decline in prices more likely, Daly said. Deflation drains growth by encouraging consumers and businesses to put off spending and investment.But most importantly, it eats away at the Fed’s credibility, she said. And now there are signs that inflation expectations are on the decline.
Fed Chair Jerome Powell cited slowing economic momentum and risks like trade tensions as reasons for putting further rate hikes on hold, and said that close-to-target inflation gives the Fed room to be “patient.”
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