⁍ The Federal Reserve’s new pledge to keep interest rates at zero until inflation is on track to ‘moderately’ exceed 2% has come under fire for being overly vague.

---

⁍ New York Fed President John Williams said the pledge is a ‘guard rail’ against expectations that the Fed would tolerate very high or persistently high inflation.

---

⁍ Williams added that if the undershoot on the target has been by a few tenths of a percentage point, the overshoot ought to be balanced against that.

---

– The Federal Reserve’s new pledge to keep interest rates at zero until inflation is on track to “moderately” exceed 2% has come under fire for being overly vague and leaving too much up to US central bankers’ judgment, Reuters reports. “Moderate isn’t a number … it’s a guard rail” against expectations that the Fed would tolerate very high or persistently high inflation, New York Fed President John Williams said at a virtual conference held by the Hoover Institution. “It’s also about proportionality.” “There’s flexibility, and there’s some discretion around that,” Williams said. “It is specific to the circumstances, and I would also say it is specific to where the economy is.” Asked why the Fed’s new policy guidance focused on interest rates rather than the balance sheet, Williams said the Fed is purchasing “an extremely high level of assets already … It’s not the case that we are not using this tool.”