Managing markets

The US Federal Reserve has announced a notable shift in its policy strategy. Addressing an annual economic policy symposium last week, Fed Chairman Jerome Powell noted the US central bank would now “seek to achieve inflation that averages 2 per cent over time”. Thus, after a period when inflation undershoots the target of 2 per cent, the Fed would aim to keep it above the target for some time. Effectively, this means interest rates would remain low for an extended period. While the new approach might cause confusion in financial markets over the medium term, it will result in higher