The Federal Reserve has made a shift this last week which is more bullish for markets.
The Federal Reserve basically said we are not going to intervene on inflation at 2%. This sent the signal that even if the Federal Reserve thinks inflation is going to go up, they will not intervene in markets.
Previously, the Federal Reserve has had a policy where even if they think inflation is going to go up, they will intervene early by raising rates to squash that outcome. The Fed made it clear that it ended that policy last week.
Another interesting point about Powell’s speech this week is that he is looking at employment demographics of different races. Until the employment comes back that is more inclusive across all demographics, the Fed will keep interest rates near zero.
Former Reserve Bank of India Governor Raghuram Rajan discusses Federal Reserve policy and its implications for emerging markets. Fed Chair Jerome Powell unveiled a new approach to setting U.S. monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come. Rajan, now a professor of finance at the University of Chicago Booth School of Business, speaks on “Bloomberg Daybreak: Australia.”