Speculation Grows Over Fed Inflation Target

Date: November 02, 2016 Last Edit: November 03, 2016

Two Percent Inflation Target May Be Firm Despite Recent Fed Chair Statements

A front-page story in the Wall Street Journal says that investors wondered whether Fed Chairwoman Yellen’s comment last month that running a high-pressure economy might help repair some of the damage from the Great Recession meant the Fed was now looking to push inflation above the two percent target. While Yellen made the comment on the same day Bank of England Gov. Mark Carney said the central bank was willing to let inflation temporarily exceed two percent and three weeks after the Bank of Japan said it would seek to surpass its two percent inflation target, Yellen was not suggesting the Fed do the same and the central bank’s projections do not indicate such a strategy. MarketWatch reports on the absence of political discussion during the Fed’s policy meetings. The piece also explains that “most economists think the Fed will decide to hold off a rate hike until its next meeting in December, in part to stay out of the spotlight with only six days to go until the election.”

What This Means For Small Businesses

Uncertainty over the future policy moves of the Federal Reserve has kept many small business owners wary of the health of the US economy as a whole. The continued uncertainty shown in these mixed signals from Fed officials is unlikely to help alleviate the concerns of small business owners. The Fed can provide more certainty about its future plans, and help alleviate small business concerns, by acting on rates in the near future.

Additional Reading

USA Today examines the timing of this week’s Federal Reserve meeting.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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