So what does it mean?
Basically, the Fed has committed to not raising interest rates as unemployment starts to (hopefully) decrease in the fall. Typically, raising interest rates is a tactic used to keep inflation at bay when people are gainfully employed.
And investors are thrilled. Markets jumped on the news before giving up some of the gains throughout the trading sesh.
The bottom line...
Inflation wasn’t the only topic on the docket yesterday. Jerry Interest Rates also announced changes to the way the Fed evaluates employment (or lack thereof). Going forward it will evaluate jobs based on the “shortfalls from its maximum level”, rather than “deviations.”
The subtle tweak is a sign that J-Poww and the rest of the plunge protection team believe low unemployment is kosher and won't necessarily lead to inflation as once feared.
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