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Federal Reserve Chair Jerome Powell is announcing a major change in policy Thursday that will allow the central bank to keep interest rates low even if inflation tops its 2% target. Tasos Katopodis/Pool/AFP via Getty Images

Fed: Rates to stay ultra-low even after inflation picks up

Associated Press Aug 27, 2020
Federal Reserve Chair Jerome Powell is announcing a major change in policy Thursday that will allow the central bank to keep interest rates low even if inflation tops its 2% target. Tasos Katopodis/Pool/AFP via Getty Images

The Federal Reserve announced a significant change Thursday in how it manages interest rates by saying it plans to keep rates near zero even after inflation has exceeded the Fed’s 2% target level. The change signifies that the Fed is prepared to tolerate a higher level of inflation than it generally has in the past. And it means that borrowing rates for households and businesses — for everything from auto loans and home mortgages to corporate expansion — will likely remain ultra-low for years to come.

The new goal says that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”

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