Pimco's Fels Expects More 'Inflation Tolerance' From Fed

The video discusses the new inflation regime, emphasizing an evolution rather than a revolution. It introduces the concept of inflation tolerance and an opportunistic reflation strategy, where the Fed may overshoot inflation targets to compensate for past undershoots. This approach requires a tolerance for deficits and a partnership between monetary and fiscal policies to boost the economy and achieve higher inflation. The goal is to increase both consumer prices and wages, ensuring real wage growth and purchasing power.

What is the main characteristic of the new inflation regime discussed in the first section?

• A complete overhaul of the Fed's strategy

• A focus on maintaining current inflation levels

• An opportunistic reflation strategy

• A strict adherence to price level targeting

Why does the Fed need to be more tolerant of fiscal deficits according to the second section?

• To increase interest rates

• Because interest rates are at the zero bound

• To maintain a balanced budget

• To reduce government spending

What was the Fed's approach during the fiscal expansion of 2018-2019?

• They raised interest rates

• They lowered interest rates

• They ignored fiscal policy

• They maintained interest rates

What is the goal of the partnership between monetary and fiscal policies in the final section?

• To lift the economy and inflation closer to long-term trends

• To reduce government debt

• To decrease inflation

• To stabilize consumer prices

What does 'good inflation' entail according to the final section?

• Neither consumer prices nor wages increasing

• Both consumer prices and wages increasing

• Only wages increasing

• Only consumer prices increasing