Fed’s new framework met with a confused shrug by the public: survey By Reuters

Fed's new framework met with a confused shrug by the

© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington

By Howard Schneider

WASHINGTON (Reuters) – The Federal Reserve hopes a new strategy rolled out last month will sink deep into the minds of the U.S. public, be well understood to involve higher inflation in the future, and prompt people to act accordingly.

Will it?

“No, no and no,” comes the answer from research https://www.fedinprint.org/item/fedcwq/88730/original published Friday by the Cleveland Fed that conducted randomized surveys the day before, the day of, and the day after a high-profile speech delivered by Fed Chair Jerome Powell describing the central bank’s move to “average inflation targeting.”

“Powell’s speech apparently did not reach or register with the vast majority of the population,” wrote the research team including University of Texas at Austin professor Olivier Coibion and University of California, Berkeley professor Yuriy Gorodnichenko.

“Even for those who heard news about monetary policy following the announcement, the news had little impact,” and left their views about the Fed and inflation “effectively unchanged … This suggests (the new strategy) is unlikely to provide many of the economic benefits that theory often attributes to it.”

The research addresses a problem Fed officials knew could bedevil them as they debated whether to move to a new approach that would allow periods of high inflation to offset the last decade of weak prices. Considered optimal in theory as something that could shift people’s expectations and cause them to behave in ways that actually produce higher inflation, selling the idea to the public and investors is a different matter.

Many on Wall Street are already taking the Fed’s new strategy with a grain of salt, with contracts tied to future inflation showing little change since the Fed’s announcement.

To survey respondents in the public at large, it barely registered, with a peak of one third of the respondents polled the day after Powell’s speech saying they had heard news, and no significant change in perceptions of inflation or household spending plans.

The survey also revealed broad misunderstanding of the central bank’s aims. Though its legal “mandate” and the focus of hundreds of speeches a year is to guarantee maximum employment and stable prices, more respondents said the Fed was in business to ensure a strong dollar and keep borrowing costs cheap for the federal government – two things the Fed says it explicitly doesn’t try to do.

“While the ‘Fed Listens,’ the public may not,” the authors jibed in a play on the public tour the central bank conducted around the country last year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

About us

InvestLab is a financial services technology company focused on the global trading market. Founded in 2010 in Hong Kong, the company develops trading, market data, and social research products that enable individual investors and small to mid-size brokers to access global markets. We provide brokers and financial institutions cross border capabilities for retail investors into 43 markets globally.