Edward Price is a former British economic official and current teacher of political economy at New York University's Center for Global Affairs. In this post, he sets out why the Federal Reserve’s new framework marks a break with the trend towards more certainty in central banking. US monetary policy is accommodative — it has been for years. But, just as loose conditions are becoming easier to anticipate, policy itself is becoming harder to predict. This has left traders on edge, with the Treasury market gyrating as they try to bet when the Fed will tighten. One cause of that uncertainty is the Federal Reserve’s new approach to monetary policy. The approach’s cornerstone, unveiled last summer, is Flexible Average Inflation Targeting, or FAIT. It goes a little something
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Edward Price is a former British economic official and current teacher...