Alice N. Sanders
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Alice N. Sanders in US Markets,

The Fed should lower its 2% inflation target

The Fed is trying to get inflation to run at 2% per year, but it has missed that goal consistent

Buoyed by prospects for stronger growth, central bankers on both sides of the Atlantic appear ready to tighten monetary policy despite having fallen short of their goal of 2% inflation. Still, their continuing obsession with 2% inflation as a measure of policy success is troubling. After all, central bankers’ mandate is price stability and maximum employment — not price stability plus 2% and millions of able-bodied people not seeking employment or counting in the unemployment tallies. Plainly, central bankers—having come of age during the hyperinflation of the 1970s and painful corrective measures of Paul Volcker and others—have decided price stability is impossible—2% is the best we can do—and genuine full employment is beyond the grasp of monetary policy.
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