The Federal Reserve policy shift announced last week is a "critical" step that will allow the central bank to adapt to the new economic reality, Fed Vice Chair Richard Clarida said Monday. The new policy unveiled by Fed Chair Jerome Powell means central bankers will not rush to raise interest rates as aggressively as in the past, and instead will allow inflation to rise above the 2.0 percent target "for some time" in order to maximize employment. The change came after years of inflation failing to reach the target for very long, and Clarida said continuing to use the same model "became difficult to justify." Although the new policy was in the works for years, the coronavirus pandemic and tens of millions of job losses it caused makes it more timely, since the new approach will allow unemployment to fall much lower before the Fed raises interest rates, as long as inflation remains tame. "This new framework represents a critical and robust evolution of our monetary policy strategy that will best equip the Federal Reserve to achieve our dual-mandate objectives" of stable prices and maximum employment, Clarida said in a speech to the Peterson Institute for International Economics. Prior to the coronavirus pandemic, the US unemployment rate had hovered near 50-year lows at 3.5 percent, which brought many people back into the workforce as firms struggled to fill open positions. After spiking to 14.7 percent, the jobless rate in July dipped to 10.2 percent. "The existing framework served us well" for several years in the wake of the global financial crisis, Clarida said. "But times change, as has the economic landscape, and our framework and strategy need to change as well." hs/cs