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Photo: Federal Reserve via Getty Images

The Federal Reserve said Thursday that, going forward, it is willing to allow inflation to drift higher than its typical 2% target for periods of time — and won't be tempted to hike rates to offset rising prices when the unemployment rate gets too low.

Why it matters: It's a historic shift in the Fed's strategy. For decades, the central bank operated with the thinking that low unemployment rates lead to inflation. That never panned out during the record-long economic expansion that ended when the pandemic hit, as inflation has remained persistently below its target since the financial crisis .

  • Federal Reserve Chairman Jerome Powell made the announcement at the Fed's annual conference in Jackson Hole, held virtually for the first time.
  • "A robust job market can be sustained without causing an outbreak of inflation," Powell said.

Between the lines: The announcement may seem like it's coming at a strange time, when unemployment is the highest it's been in years. But it's the highly-anticipated result of a policy review the central bank announced it would do two years ago.

Go deeper

Trump nominee Christopher Waller confirmed to Fed board

Christopher Waller at a Senate Banking hearing earlier this year. (Photo: Sarah Silbiger/Getty Images)

The Senate voted 48-47 on Thursday to confirm Trump nominee Christopher Waller to the Federal Reserve Board of Governors — filling one of the two vacant slots on the influential economic body.

Why it matters: It's one of the last marks left on the Fed board by Trump, who has nominated four of its six members (five including Jerome Powell, who was elevated to chairman under Trump).

Dion Rabouin, author of Markets
Dec 4, 2020 - Economy & Business

San Francisco Fed chief says Fed must do better on inequality

San Francisco Fed president Mary Daly. Photo: Nick Otto/Washington Post via Getty Images

While the Fed chair has downplayed and even denied the central bank's role in ratcheting up income inequality and the K-shaped recovery, other Fed members are taking responsibility and calling for change.

What happened: San Francisco Fed president Mary Daly took the subject head-on in a speech earlier this week, saying the Fed "will need to do more to ensure that the benefits of low interest rates and rising asset valuations can spread widely throughout the economy."

Exclusive: Law enforcement organizations back Biden pick for assistant AG

Vanita Gupta Photo: Demetrius Freeman/The Washington Post via Getty Images

Local and federal law enforcement officials are backing Vanita Gupta, President Biden’s nominee for associate attorney general, according to letters sent to the Senate Judiciary Committee and obtained by Axios.

Why it matters: The Major County Sheriffs of America noted Gupta “emphasized that she does not support efforts to ‘defund the police'” and highlighted her desire to improve criminal justice through methods that include increased training for law enforcement officials.