Powell Faces Key Question: What’s Wrong with Low Inflation?

WASHINGTON (AP) — When out shopping, most Americans like lower prices. But the Federal Reserve sees things a little differently.

Fed Chairman Jerome Powell instead says that low inflation, along with low interest rates, are “longer-term challenges” for the United States.

In a brief speech in Kansas City, Missouri, Powell also acknowledged that such a view might be confounding to many Americans: “You may be asking, ‘What’s wrong with low inflation and low interest rates?'” he said.

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The question highlights a problem for the Fed: It is struggling to get inflation closer to its 2% target, but also has to explain to the public why it wants to push inflation higher.

The Fed targets 2% inflation as a cushion against deflation, a destabilizing fall in prices and wages that can cause a recession.

 

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