Economics
The Fed Has a Problem at the Heart of Its Battle to Spark Inflation
- Markets heat up as Fed signals strong hold in period of growth
- Low rates driving investors toward higher risk assets
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There’s a flaw at the heart of central banking’s approach to inflation targeting that’s become a hot issue for the Federal Reserve as it takes a long, hard look at its strategy.
For decades, central bankers have pursued price goals while saying financial stability risks are better curbed by regulation. The contradiction is that monetary policy is often the most powerful fuel for asset bubbles as central bankers hold interest rates low to try and lift inflation that remains weak despite solid growth and rising productivity.