In the “old” days, the Fed’s inflation target was 2%, and if inflation goes above that level, it will bring down inflation. Now, in the new approach, the Fed will allow inflation to exceed the standard 2% target before raising interest rates. This is a big change, which means the Fed could keep rates down for a long time. The Fed will use the “average inflation target” instead of the 2% target.
Goldman Sachs has predicted that rates could stay low for as long as 2025.
The Federal Reserve’s new goal will be to stabilize the economy and keep the unemployment rate as healthy as possible.