Fed’s Brainard: New policy approach avoids need to tighten preemptively

St. Louis Federal Reserve President James Bullard said on Wednesday that the Federal Reserve’s new monetary policy approach avoids the need to tighten preemptively, as reported by Reuters.

Additional takeaways

“Avoiding preemptive tightening could boost employment, the economy’s potential growth rate.”

“The timing of interest rate liftoff depends on realized progress toward maximum employment, 2% average inflation.”

“Changes in the Fed’s policy rate after liftoff are likely to be only gradual.”

“Coronavirus vaccines, additional fiscal support are positive developments, but near-term economic outlook remains challenging.”

“The economy remains far from our goals, seeing a loss of momentum in the fourth quarter of 2020.”

“Continued social distancing in cold winter months likely to drag on spending.”

“Inflation remains very low; may rise temporarily above 2% in a few months but we need to see a sustained improvement to meet our goal.”

“Employment remains far from the Fed’s goals, economic recovery is highly uneven.”

“The economic outlook is highly uncertain, will depend on the path of virus and vaccination campaign.”

“Some upside risk if vaccines trigger globally synchronized expansion.”

“It is too early to say how long it will take to reach the Fed’s goals.”

Expecting the Fed’s current pace of asset purchases to remain appropriate for quite some time.”

Market reaction

The US Dollar Index showed no significant reaction to these remarks and was last seen gaining 0.2% on a daily basis at 90.27.