The US Federal Reserve’s new framework means that they will have tolerance for a modest inflation overshoot, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday. “Moderate overshoot on inflation probably means 2.25% or 2.5%,” Kaplan further explained.
Additional takeaways
“New Fed framework is not a commitment on what the Fed will do.”
“New framework suggests US economy may have the capacity to run a hotter labour market than in past.”
“It’s wise to go forward not assuming the future will look like the past.”
“Markets must not rely on the Fed’s emergency lending programs forever; they will sunset.”
Market reaction
The US Dollar Index showed no reaction to these comments and was last seen gaining 0.2% on the day at 93.08.
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