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The Fed recently introduced an average inflation targeting framework, in which past inflation shortfalls shape current policy. This column assesses this policy relative to alternatives in the context of the Covid-19 recession and recovery. The authors calibrate a simple New Keynesian model at the zero lower bound to replicate the Fed’s policy, finding that the new framework ....
02/24/2021 | Press release | Distributed by Public on 02/24/2021 12:06 U.S. Economic Outlook and Monetary Policy It is my pleasure to meet virtually with you today. 1 I look forward to our conversation, but first, please allow me to offer a few remarks on the economic outlook, the Federal Reserve s monetary policy, and our new monetary policy framework. Current Economic Situation and Outlook In the second quarter of last year, the COVID-19 (coronavirus disease 2019) pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the U.S. economy since the Great Depression, but economic activity rebounded sharply in the third quarter, supported by a robust and unprecedented fiscal and monetary policy response. More recently, the pace of recovery has moderated in part because of a winter resurgence in COVID-19 cases and hospitalizations. ....