Federal Reserve (Fed) Chairman Jerome Powell acknowledged his mistake in trying to keep inflation below 2 percent for several years, and said President Donald Trump was right that the approach should be more flexible.
Now the Fed will allow inflation to rise a little more than 2 percent and its criteria will consider an average percentage, instead of being rigidly tied to a particular figure, Powell explained, according to Fox News on Sept. 4.
“President Trump was right; we were wrong,” Powell admitted in his speech at the Jackson Hole Economic Symposium in Grand Teton National Park, Wyoming.
“This change may seem subtle, but it reflects our view that a robust labor market can be sustained without causing an outbreak of inflation,” Powell added.
The effect on the economy will be to speed up its expansion, which in practice drives wage growth.
Powell was appointed as director of the Federal Reserve by President Trump and hoped that he would promote economic growth, but that was not the case initially.
President Trump pointed out the Fed mistake
Heritage Foundation Economic Growth Project distinguished visiting fellow Stephen Moore noted that President Trump is the one who has been drawing Powell’s attention to his mistake.
“In recent years Trump has been the one sounding the alarm that the Federal Reserve has been too tight, as evidenced by falling commodity prices and long-term interest rates (market rates),” Moore said in an article published on Fox News.
“Trump may not be a trained economist, but when it comes to creating growth, this real estate titan has strange instincts,” Moore said.
Moore also describes the big mistakes made by the Federal Reserve with its misguided economic policies.
“In February 2018, the Federal Reserve stupidly crushed a robust recovery of full employment and rising wages …” Moore said.
He added: “The stock market plunged and growth stalled. If the Fed had not followed Trump’s advice and reversed course in early 2019, the economy would have capsized.”
This shift in focus by the Federal Reserve is part of helping to strengthen the U.S. economy, which has deteriorated under the impact of the CCP (Chinese Communist Party) Virus.
The central bank has already lowered interest rates to almost zero and bought trillions of dollars in assets, according to Forbes.