Breaking: FOMC Chairman Powell says Fed will target average inflation as new strategy

Jerome Powell, Chairman of the Federal Reserve System, said that the Fed in its new strategy will target average inflation in his prepared remarks at the virtual Jackson Hole Economic Policy Symposium. 

Market reaction

With the initial reaction, the US Dollar Index (DXY) slumped to a six-day low of 92.64 before recovering its losses. As of writing, the DXY was down 0.1% on the day at 92.78.

Follow our live coverage of the market reaction to Powell's remarks. 

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Key takeaways from the Fed's official statement

"Fed places employment before inflation in new monetary policy strategy, will seek to ensure that employment does not fall short of its maximum level."

"Committee now seeks to achieve inflation that averages 2% over time, will offset periods of weak inflation with inflation above 2% for some period of time."

"Committee judges that the downward risks to employment and inflation have increased."

"Longer-term inflation expectations that are well-anchored at 2% enhance the committee’s ability to promote maximum employment."

"Shift motivated by underlying changes to the economy including lower potential growth, and persistently lower interest rates and low inflation."

"Hard to overstate the benefits that higher levels of employment have for racial, ethnic minorities, and others "Left behind for too long"

"Changes to the Fed strategy on employment reflect an appreciation for the benefits a strong labour market has for low and moderate-income communities."

"Committee judges that the level of federal funds rate consistent with longer-run maximum employment and price stability has declined relative to its historical average."

"Federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past."

"Committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals."

"The Fed is mindful of the burden that higher prices for food, essentials, could pose, but wants to prevent adverse dynamics of weak inflation expectations seen in other countries."

"New statement reflects the Fed view that a robust job market will not necessarily lead to unacceptable levels of inflation."