This is the second post in a series of blogs on the Fed and inflation expectations.
An in-depth policy review at the Federal Reserve is in full swing, and the central bank could announce significant changes to its monetary policy approach early next year.
The Fed’s review aims to address the challenges faced by central banks in the aftermath of the global financial crisis, as we write in our Macro and market perspectives Fed to raise its inflation game? These challenges are rooted in falling neutral interest rates–rates that would neither stimulate nor hold back economic growth–and declining inflation expectations. Both of these could limit the ability of monetary policy to counter future downturns.