You’ve probably heard the saying “the rudder doesn’t work unless the boat is moving.” Right now, when it comes to the economy, we won’t see movement unless we look to 2 percent inflation and that was the impetus behind the Federal Reserve’s recent policy shift.
The Fed is focused on spurring higher inflation, increasing economic activity and lowering unemployment while providing guidance that interest rates will remain in the low band in order to provide stability and certainty in the economy. It came at a time when the level of uncertainty around the strength of the US economy is at an all-time high from consumers, investors and the broader financial industry. Meager inflation can lead to falling prices and prompt consumers to put off buying things. Scant inflation leaves the Fed little room to cut rates further.
The Fed’s plan of action will keep interest rates low