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 meant by 'inflation tolerance' in the context of the new inflation regime?

How does the new inflation regime differ from formal price level targeting?

What role does fiscal policy play in the new monetary-fiscal partnership?

Why is it important for both the government and the Fed to aim for higher inflation?

What does the speaker imply about the relationship between inflation and real wages?