CIBC Research discusses its reaction to today's Fed Powell speech at Jackson Hole Symposium.
"Chairman Powell's remarks continued the tradition of central bankers using the Jackson Hole Symposium as a forum for communicating important changes in policy. In the much-anticipated speech, Powell signaled a change in the way the Fed targets inflation. The central bank will now target an average of 2% inflation over time, meaning that, after shortfalls in its inflation target, it will attempt to make up for it by running inflation slightly above target for a period. The central bank had not been accounting for past shortfalls (or overshoots) when addressing policy in the past,' CIBC notes.
"The change means that the central bank will be more willing to stimulate the economy even as the unemployment rate falls, specifically leaving the fed funds rate at the effective lower bound for longer than previously expected. The market had been anticipating such a change, and rates actually moved lower after the remarks were published," CIBC adds.