How the Federal Reserve's major shift could benefit investors

Key Points
  • In a major policy shift, Powell said  the central bank plans to let inflation run hotter than normal in order to support the ailing labor market and support the broader economy.
  • In every decade since the 1980s, an uptick in inflation causes an acceleration of profits, according to data from Fidelity Investments. 
  • "An environment in which prices are rising and inflation is rising, makes for an environment in which its easier to pass on higher input costs," said Gregory Daco, chief U.S. economist at Oxford Economics.
US Federal Reserve Chairman Jerome Powell gives a press briefing after the surprise announcement the FED will cut interest rates on March 3, 2020 in Washington, DC.
Eric Baradat | AFP | Getty Images

The Fed now likes inflation.

In a historic shift, Federal Reserve Chair Jerome Powell announced on Thursday the central bank will let inflation tick higher amid a coronavirus pandemic that has dragged the U.S. economy into a recession.

While inflation can be scary to investors, history shows that company profits increase when inflation is rising. In every decade since the 1980s, an uptick in inflation causes an acceleration of profits, according to data from Fidelity Investments.