A chorus of market watchers believe it might be time to retire this objective.
A cyclist passes the Federal Reserve building in Washington, on Aug. 22, 2018. (Chris Wattie/Reuters/File Photo)
Economists maintain that the Federal Reserve’s 2 percent inflation target is crucial and should not be changed, as altering it could send the wrong signal to consumers. The U.S. central bank officially adopted this target in 2012, although it had been informally settled upon in the 1990s. Recently, there has been public discussion suggesting the Fed should reconsider this target due to persistent inflation and slowing progress in stabilizing prices.
Joe Brusuelas, chief economist at RSM, emphasized the importance of consistency in Fed guidance for financial and economic stability, suggesting a cautious approach. He proposed incrementally increasing the inflation tolerance to a range of 2.5 percent to 3 percent while maintaining the policy rate at 5.5 percent.
David Wessel from the Brookings Institution argued in 2018 that the Fed should raise its inflation target, possibly to 3 percent or 4 percent, while continuing to target inflation.
However, Federal Reserve Chairman Mr. Powell has consistently reaffirmed the central bank’s commitment to the 2 percent inflation target. In December 2020, he dismissed proposals to change the target, stating unequivocally that the Fed would maintain the 2 percent target and use its tools to achieve it. At the Jackson Hole Economic Symposium in the previous year, Mr. Powell reiterated the Fed's stance, emphasizing that the 2 percent inflation target remains unchanged.
0 Iruzkinak