Fed’s Brainard calls for flexible average inflation target

NEW YORK: The Federal Reserve should move from a strict 2 per cent inflation target to a broad, “flexible” promise that inflation would average that level over time, a key member of the US central bank’s board of governors said on Tuesday in one of the most explicit endorsements yet of changes in its monetary policy framework. Fed Governor Lael Brainard said her idea would see the central bank change its target, after sustained periods when inflation has been below 2 per cent, to a similar level above 2 per cent, and tell the public that inflation would run higher for about the same amount of time. Her concept, she said during an appearance before the New York Association of Business Economics, is less strict than some of the other proposals being floated as part of the Fed’s current review of monetary policy. But she feels it would be more credible in the eyes of the public as a result, and give Fed officials more leeway in deciding how to set interest rates at any given point. — Reuters