Part 1: Inflation goals
Ellen: Hey there! Why is the Fed trending right now?
Renuka: Oh yeah, they adjusted how they target inflation
Ellen: Target inflation? What does that mean?
Renuka: It’s a way to think about how to keep prices stable
Renuka: That’s one of the Fed’s main goals
Ellen: So what’s the target?
Renuka: For years the Fed has aimed for 2% inflation
Renuka: But it’s been below that
Renuka: So they will make up for the lows sometime in the future
Ellen: How does that work?
Renuka: When inflation starts to rise, it’ll be okay if it stays a bit above target for a while
Renuka: To average out for times when it was low
Ellen: Got it. But why change now?
Renuka: The economy has changed
Renuka: So it makes sense to rethink the best way to meet the goal
Ellen: How is the economy different?
Renuka: Inflation doesn’t respond to the economy like it used to
Renuka: So it’s often below the Fed’s target
Ellen: And the change will help?
Renuka: Yeah! That way people can be sure prices will stay stable
Renuka: And that helps the economy grow
Ellen: Ah ok, thanks!
Renuka: Any time!
Part 2: Employment goals
Sean: Hey Shelby! Does the Fed have anything to do with jobs?
Shelby: Oh yeah! One of the Fed’s main goals is maximum employment
Sean: What does maximum employment mean?
Shelby: That’s something the Fed just updated
Shelby: They’ll focus on having enough jobs
Shelby: Without worrying about having too many
Sean: Why would they ever worry about too many jobs?
Shelby: A booming job market used to mean higher inflation
Shelby: But now, inflation stays low, even with a lot of jobs open
Sean: How will they know if they hit maximum employment?
Shelby: One way to think about that is
Shelby: When everyone who wants a job can get one
Shelby: The goal is to reach people everywhere
Sean: Why is that important?
Shelby: For a healthy economy, everyone needs the chance to work
Sean: Especially when things are stressed!
Shelby: Yeah, low and moderate income areas are often hit hardest
Shelby: So it’s important to make sure everyone benefits when the economy gets strong
Sean: So, why the change?
Shelby: They’ve talked to people all over the country since 2019
Shelby: So they’re acting on what they’ve learned
Sean: Interesting, thanks!