Fed's Kaplan Sees Rates Near Zero for Up to Three Years

The transcript discusses the Federal Reserve's adoption of new forward guidance incorporating average inflation targeting. The speaker dissents from this guidance, preferring more policy flexibility. They advocate maintaining the current Fed funds rate until the pandemic is over and full employment and price stability are achieved, which may take 2-3 years. The speaker forecasts solid economic growth and a decrease in unemployment by 2023. Concerns are raised about the risks of committing to low rates long-term, potentially encouraging excessive risk-taking in asset markets.

What is the main reason the speaker prefers retaining policy flexibility in the Fed's forward guidance?

• To immediately increase the Fed funds rate

• To eliminate the need for inflation targeting

• To allow future committees to make informed decisions

• To ensure rates remain at zero indefinitely

According to the speaker's forecast, what is the expected unemployment rate by 2023?

• Exactly 4%

• Above 5%

• Between 4% and 5%

• Below 4%

What factors does the speaker believe will influence the economic growth forecast?

• Global trade agreements

• Technological advancements

• Virus management and fiscal policy

• Interest rates and stock market trends

Why does the speaker dissent from the Fed's commitment to low rates?

• To prevent excess risk-taking in asset markets

• To increase inflation rates

• To encourage more savings

• To reduce government spending

What potential issue does the speaker associate with keeping rates low for an extended period?

• Increased unemployment

• Higher inflation

• Systemic fragilities and excess risk

• Decreased consumer spending