Fed’s floor could be ‘junked’ if credit surges – Goodhart

Charles Goodhart

The Federal Reserve will be forced to abandon its floor system for setting rates “if and when” major inflationary pressures return, argues UK-based economist Charles Goodhart.

The floor system is effective only in the current deflationary environment when borrowing activity is relatively subdued, the former Bank of England monetary policy committee member says. “It will survive and survive very comfortably, as long as we have deflationary headwinds,” he says.

Not all economists agree the

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