Fed chair Powell: To achieve inflation of 2%, need to see inflation average 2%

Fed Powell speaking at Princeton

• Fed not tied to a set formula for inflation target
• To achieve inflation of 2% need to see inflation average 2%
• Will tolerate inflation over 2% to get the average to 2%
• flexible average inflation targeting means we have not tied ourselves to mathematical formula
• we want inflation expectations while anchored at 2%
• since we announced framework, there is evidence market participants have shifted expectations to be consistent with guidance
• will need to see inflation rise above 2% for a time for a new framework to be credible to the public
• Will not raise rates to ward off theoretical threats of inflation, imbalances.
• In near term as pandemic recedes it could be exuberant spending, upward pressure on prices
• One time rising prices won't mean persistent inflation
• We are long way from maximum employment
• there is a shortage of demand globally
• If inflation were to move up in ways that were unwelcome, Fed has tools for that and will use them