Janet Yellen backs form of price-level targeting for Fed
Former chair says current system risks downward spiral of long-term rates
Janet Yellen backed a form of price-level targeting for the Federal Reserve during remarks on November 26.
The former Federal Reserve chair warned that failing to adapt the Fed’s framework to cope with more frequent periods at the zero lower bound (ZLB) could cause long-term rates to spiral further downwards, adding fresh complications for policy-making.
If the Fed does not correct for below-target inflation, market participants will come to expect average inflation of less than 2%, Yellen
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