Economic Affairs

Fed sets the stage for more asset price inflation

Higher tolerance for inflation means interest rates will stay lower for longer

If you thought the Covid-19 pandemic would, at some point, be the catalyst to bring down overinflated asset prices, you might need to think again, because there is a good chance that they could get even more overinflated - thanks to the United States Federal Reserve.

For decades, central banks have had a totemic fixation on controlling inflation. That has been the main mandate and focus of monetary policy almost everywhere.

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A version of this article appeared in the print edition of The Straits Times on September 02, 2020, with the headline 'Fed sets the stage for more asset price inflation'. Print Edition | Subscribe