The Federal Reserve said on Thursday that it was adjusting its long-standing dual mandate of full employment and price stability, adopting what was widely interpreted as easier and more flexible monetary policy in the face of the worst economic downturn since the Great Depression.
In prepared remarks at the Kansas City Federal Reserve’s annual Jackson Hole symposium, which is taking place virtually this year, Federal Reserve Chairman Jerome Powell said the Fed will shift its definition of “maximum employment,” and also amend its focus on inflation by relaxing its 2% inflation target.
The announcement, the Fed’s first policy framework change in more than right years, marks a new era in how the Fed approaches monetary policy, encapsulating a year-long strategy review of the central bank’s longer-term goals and monetary policy strategy.
"The economy is always evolving, and the FOMC's strategy for achieving its goals must adapt to meet the new challenges that arise," Powell said Thursday.
"Our revised statement reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities, and that a robust job market can be sustained without causing an unwelcome increase in inflation," he continued.
The Fed has focused on the two-fold mandate of raising interest rates to combat rising prices for consumer goods and services for many years, and, at the same time, adjusting monetary policy to ensure its definition of “full employment” was consistently achieved.
Watch the video above to hear why Jim Cramer thinks Jerome Powell's messaging and the Federal Reserve's Action was just what markets needed.
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