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Image: Zhuo Zhang on Unsplash
Chairman Powell said last week at the Federal Reserve conference in Jackson Hole, Wyoming, that the central bank will aim for 2% inflation in an effort to increase market growth and employment rates in a sustainable matter.
Flexible average inflation targeting allows the Fed to adjust the inflation rate quickly. 2% is their sweet spot because it reflects confidence in investors to speculate responsibly while also not stifling economic activity. By controlling the money supply, the Fed can make decisions to bring the inflation rate to the acceptable band. If inflation needs to raise, they'll release more money into the economy. Inflation also devalues debt.
2019 saw the Fed on a listening tour gauging the impacts of the proposed policy. Your favorite plumber and his producer were not consulted.