Fed Considering Policy Shift: Inflation Target to be Adjusted?

The international stock markets suffered their largest decline in more than three weeks on Thursday, while the US dollar rose. The reason for this was unexpectedly strong growth figures from the USA, which raised doubts about the intensity of the Federal Reserve's (Fed) rate-cutting cycle. In this context, there is speculation about whether the Fed might replace its current 2% inflation target with an inflation range, an idea supported by Atlanta Fed President Raphael Bostic. The question remains whether other Fed representatives will also support this idea. Interested readers can find analyses in recommended articles on how a possible "Government Shutdown" in the USA could affect the financial markets and what shock brought global investors back into the market. Also highlighted is why Microsoft missed an opportunity in the AI sector and the significance of the boom in the robo-advisory market. In the markets, the energy sector was the only sector in the S&P 500 among the winners with a gain of 0.9%. Intel and IBM recorded substantial price gains, while CarMax plummeted by 20%. Oracle and Freeport-McMoRan were also among the losers. The US dollar gained in value and experienced its largest two-day increase in two months, while commodities like copper declined and non-gold metals such as silver and platinum rose. Rising global debt levels, which have reached a record level of $338 trillion, raise questions among investors. However, debt compared to GDP fell to a five-year low, which reduces skepticism. Fed discussions about a possible adjustment of the inflation target could gain new impetus from personnel changes on the board and the upcoming expiration of Jerome Powell's term as chairman. Currently, however, it remains questionable how soon such an adjustment could take place. This could become particularly important as inflation is expected to remain above the desired level for several more years.