According to a recent CNBC report, the Federal Reserve is set to make a major commitment to “ramping up inflation.”
According to the report, the Fed will pivot to “average inflation targeting.” With this strategy “inflation above the central bank’s usual 2% target would be tolerated and even desired.”
Practically speaking, the Federal Reserve would not raise interest rates until both its employment and inflation targets are met, meaning the central bank would likely keep interest rates at zero for years.
The central bankers have actually been hinting at this for quite a while, using the term “symmetrical inflation target” in FOMC statements and press conferences. Peter Schiff talked about this in a podcast last December.
What that means is inflation above 2% by an equal amount that used to be below 2%. Now you actually have the Fed talking about adopting that officially into their mandate about having inflation run above 2% adjusting their target north so that the official target now is above 2%.”
The Fed is currently completing a year-long policy review and is expected to announce the results within the next few months.
During his podcast this week, Peter said you have to step back from a headline like that.
Even more inflation than we’ve got now? I mean, how can we have more? Look how much money they’re printing.”
In a nutshell, the Fed simply wants to make sure it’s absolutely clear that it isn’t even thinking about thinking about raising interest rates. As Peter put it, one way to make sure we know that is to say, “Hey dummy, we don’t care how high inflation gets. We’re not raising rates.”
Of course, the Fed doesn’t look at the real rate of inflation. It looks at the CPI or some core index within that number. Peter said they’ll likely look at an index that will never get above 4% even if the actual inflation rate is 20 or 30%.
Source: SchiffGold
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