Where Did the Fed's Inflation Target Come From?

One part of the Federal Reserve's dual mandate is to keep inflation in check, which has proven to be stickier than expected after the pandemic. But, where did the Fed's 2% inflation target come from, and does it make sense in today's economy?
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[@jessiemartinfostersr.6067]

ALL WORDS . THE FED HAS NO TARGETS .

[@isaacmcareavey237]

are you stupid?

[@jedi10101]

so the 2% came from an arbitrary 0-1% statement by a new zealand minister & evolved over time to 2%.

[@Jonathan2x6]

Thats right blame it on another country. Well 2025 could be the year US could set its own bigly inflation target number. During covid injecting bleach was suggested. Who knows what could happen this time. The possibilities are endless. USA! USA!

[@isaacmcareavey237]

lol no not at all

[@jedi10101]

​@@Jonathan2x6 what the hell are you blabbering about? did you even watch the whole video? blame it on another country? my statement was based on the video. only a deranged maga mind would twist & bend factual observations into hideous interpretations. clearly, deranged maga mind isn't limited to trump supporters.

[@jedi10101]

​@@Jonathan2x6 blame it on another country? what are you smoking? did you even watch the whole video? didn't the report trace the roots of inflation targeting to new zealand? your twisted take on my statement shows lunacy isn't limited to the maga mind.

[@jedi10101]

​@@Jonathan2x6 the report traced the roots of inflation targeting to new zealand. your statement shows lunacy isn't exclusive to the maga mind.

[@MBarberfan4life]

That ending is interesting. For the people who lived through the 70s, when did you stop experiencing sticker shock? 5 years later? 10 years later?

[@jordanmoss2290]

" ya that tv will be $8 cheaper in 1800 months so i better just wait" said nobody

[@Teekles]

We'll attempt to have 0-2% inflation while we massively print money so that we can pay back our previous debts and expect nothing to break except for the people's back. Diminishing returns never sounded so fun.

[@user-yx3zl4kh8h]

They picked a number that was readily achievable. Because picking a lower number might set yourself for failure. If the FED raises the number above 2%, it just means 2% is no longer achievable. Given enough deficit spending, and a large enough debt, you will see the day when the FED says: 5% is best for the economy, then 6%, 7%, .......

[@EduardoEscarez]

First, the Fed doesn't want to choose another number by random but using data to figure out a good way. And for I have read on the past, some people think a 2.5-3% target is the optimal one. Second, the problem of choosing a lower inflation rate is that means the Fed has to constantly use monetary policy even when it should be prudent not to do it, with all secondary effects like lower job creation or higher credit costs. But finally, the Fed is stuck at 2% because it can't break that kind of promise to the markets, only when things are stable enough it can start to figure out a better way to determinate the optimal long-term inflation rate.

[@T_1357_F]

​@@EduardoEscarez That's a perfect "chicken before the egg" argument. You can reverse everything you said and it will still makes as much sense.

[@EduardoEscarez]

@@T_1357_F That's the problem of economics, that everything is a chicken and egg situation and sometimes it's difficult to predict outcomes. Nobody likes inflation but a lower target means more restrictions to credit, higher long term unemployment rate, and lower GDP growth. A higher long term inflation rate allows more GDP growth and lower unemployment, but creates its own problems. And that doesn't count the fact that often people change its opinions of what is more urgent. It would be better if the Fed had more tools to manage monetary policy, but nobody wants that so it has limited options to do its best 🤷🏽‍♂️

[@ChopperPilot136]

Out of thin air!

[@MBarberfan4life]

So, they could change it again? Yeah, fiat money is pure trust, and that trust has constantly been broken. It's time to return to a base money that is fixed in supply.

[@isaacmcareavey237]

what are you on about

[@SyMaija]

Most countries decided to tax all citizens an addt''l 2%

[@davidgator2279]

Agree, the target should not be changed!

[@randydang6166]

Powell was praying to let him survive till his term ends. The guy is stuck lol.

[@jamesedward6424]

The natural rate of “inflation” would be something like negative 1% which tells you the manipulation

[@jdubruyn]

Next level cool thumbnail

[@lowtech_1]

Negative rates pure genius, who would have thought house prices would rise

[@MD-1984-h8h]

I just love the thumbnail, it seems as if JPowell is experiencing some mid life Crisis after Donald Trump got re-elected

[@YT2-qm9pk]

😂

[@ThuylanHa-k9x]

The responsability of FED is the modelisation of economic politique in order somehow to find a kind of relative stability on the economy. FED's work depends on the evolution of political decisions from the gouvernance of the administration under differents Presidents. It's like the coordination between two partenaires in a tango dance. The impact of a FED's decision is effective in a medium or long term basis. The FED's management based on his evaluation of risks coming from different threats that could affect the balance of economy like COVID19 crisis or economic crisis. The quality of the decision depends on the time FED have to analyse the risks of each situation. But when chaos is created by a bad decision like the tarifs' implementation on a very short time, it brings a lot of unnecessary challenges .

[@JohnStiles-t1k]

I'm 50 and a retiree, and I'm worried about the impact of inflation on my retirement portfolio. I've got about 600,000 invested in a mix of stocks, bonds, and real estate, but I'm not sure if I'm doing enough to keep pace with rising costs. What's the best way to inflation-proof my portfolio?

[@RonnieStevenson-q1u]

Consider investing in inflation-indexed instruments: Such as TIPS or inflation-linked bonds

[@FredMcCall-k9o]

@@RonnieStevenson-q1u Seek guidance from a comprehensive financial planner who specializes in retirement planning and inflation management. Avoid making financial decisions on your own, especially in uncertain times like these.

[@JoseRuiz-vm8hr]

Your best bet is to get your money back and fill your mattresses with it! Now a days you can't trust investment companies or government. Learn from your ancestors they knew how to keep their money safe. It also kept them warm and comfortable on clod nights.

[@glennnielsen8054]

There is only monetary inflation, the rest is ordinary price dynamics. The target should be ZERO.

[@LittleFoot27]

The 2% and the rabbit came from the same hat

[@nellyjohnson7316]

Plucked it out of the thin air.

[@Justin-n5d]

Fed chief Jerome Powell earns $190,000 a year to make a speech once in awhile.

[@melodyocampo227]

True and his net worth in 2024 was estimated at around $50 million.

[@aryankushwaha1964]

this comment make u relize how dumb u are

[@WH0oo...]

The US could instantly correct inflation. Eliminate corporate subsidies and collect 100% taxes and remove it from circulation instead of increasing unemployment.

[@nellyjohnson7316]

Fed has to stop paying interest on its treasury debt.

[@gal4645]

come from state or custom duty

[@Casualgaming-dw5gm]

why is the video ended so sudden

[@EduardoEscarez]

The video is just a segment of the latest episode of "Wall St. Week", so that is so sudden the cut. I think they're going to upload the whole program tomorrow or Tuesday.

[@Casualgaming-dw5gm]

@@EduardoEscarez it is okay to cut a capture of the live program to a separate video, just the cut point is bit strange. Anticipated it includes the whole program.

[@JoseRuiz-vm8hr]

Whenever the government requires funds for various expenses, they could impose taxes on Americans, but instead, they opt to increase the prices of goods consumed by the public. Regardless of the method, citizens ultimately bear the cost of government initiatives.

[@jimmyrebel9385]

out of thin air

[@pureland2703]

The target comes out of the blue!

[@cryptoholic6637]

If they keep it at zero the rich can’t make money

[@glennnielsen8054]

Monetary inflation is the easiest way for a State to get out of a debt spiral, as very few understand that it is in reality a tax that dilutes the value of the existing money supply. The method of calculating inflation is inherently flawed. Changes in the money supply are more accurate.

[@bbmak0]

2% inflation tax on Americans

[@Gandalf17]

short answer: the 2% target they pulled it out of their a**. AND MOST IMPORTANTLY INFLATION HAS BEEN WELL BELOW 2% OVER THE LAST YEAR. THE ONLY THING KEEPING THE AVERAGE INFLATION ABOVE 2% ARE CAR INSURANCE AND MORTGAGE RATES!!!WHAT CAUSES MORTGAGE RATES TO BE HIGHER? THE FED. WHAT CAN THE FED DO TO CAR INSURANCE? NOTHING

[@jdowning39]

2 percent doesn't account for gas and food prices, so it's higher than that these days. But plus they have to pay social security

[@isaacmcareavey237]

what are you talking about, the CPI definately does account for gas and food prices, social security is paid via taxes and borrowing, nothing to do with inflation

[@Jpkarthik-n4h]

If u think ur enemy / opponent is stupid , what will happen, the answer is " " , thanks.

[@dreadfuldonkey]

The world moves forward with expansion, when something isn’t expanding its dying. Every job is a dead end

[@mahmoudghoneim8004]

Why inflate price to show growth, you can grow consumption volume and increase money supply accordingly, no need for inflation.

[@SoStupidTrader]

Everything look similar to stimulation 😊😊😊.

[@MuhdKhairulHassan]

We need a serious market crash.

[@audiquagaming]

Trump will mane inflation go atomic have fun everyone😂

[@pacpern9988]

3% would be fine this is an artificial goal causing too much pain

[@SpeedOfDarknesss]

Deflation is very bad because: it incentivizes delayed purchases, hoarding of non-productive assets, and lowers the effectiveness of central bank tools. 2% is the target to give a buffer against the bad scenario without drastically effecting consumer/business stability. It is arbitrary in the sense you could choose any small positive number like 1-5%, but it is not arbitrary in the sense that it absolutely serves a purpose and this comment section is ill informed.

[@MrSeadawg123]

You do know The Fed is not a government organization. Governments can print their own interest free money. It is a private banking cartel.

[@MrSeadawg123]

What they are talking about, Is the Cantillon effect,

[@960john]

Ok, but why not 1%? Inflation has always a wealth redistribution effect from fixed income/ wage earners to business owners. It widens inequality. I also don't appreciate negative real rates and this idea that we should over-depend on central banks to be stimulative and restrictive, especially through QE.

[@MrSeadawg123]

@960john If it is coming from the Fed. And their lips are moving. They are lying!!

[@SpeedOfDarknesss]

@ I don't know what the optimal target is (probably nobody does), but I do think a reasonable argument could be made for 1%. I also agree that QE has been overdone.

[@ghunijoturmandakh2062]

Trump just made his job impossible lmfao.

[@leealex24]

2% inflation is reasonable.

[@idrissamorehouse322]

What this piece does't mention is that the whole market is operating under a universal belief in maximizing profits based on the metrics of supply and demand - prices keep climbing to maintain corporate earnings growth - this piece is a bunch of smoke and mirrors double speak - I've stopped buying overpriced goods -there is no market profits without all of us being in the market - why are french fries $3.00 @ Wendys but $4.25@ MCDONALDS ? From french fries to housing Its supply and demand metrics which are then used to configure push and justify the highest price the market will support - educate yourself people - these talking heads are living in their own bubble with a focus on tracking short term ups and downs - they have a major bias towards data which is not only never 100% accurate but takes massive amounts of time to arrive a a general average for large scale percentages

[@gmp116]

Plenty of uninformed armchair economic advisors here don’t even bother to think about this beyond their thumb movements. Powell has forgotten more in the past day about economics than some of you have ever known

[@lakeguy65616]

the inflation target should be 1/2% or so.

[@EduardoEscarez]

The catch with a lower target is that the Fed would have to raise interest rates and cool even more the economy, so that would be less jobs and more expensive credit on every area, from consumer to mortgages and businesses.

[@lakeguy65616]

@@EduardoEscarez A lower inflation rate means lower interest rates at the long end of the yield curve. Lower interest rates stimulate the economy and the labor markets....

[@drewgb]

Any rate above 0 is unlawful. The Fed needs to be abolished. The chairman and some members should face jail time.

[@25STB2]

~19.30 on February 1, 2025. The brain can't think of anything, only fake thoughts. The headphones don't understand anything, as if there is interference in listening. The eyes are distorted. The ears and eyes are distorted in similar ways. It's been like this for several days now. It's almost every day. Today during the day I can't think of anything. Maybe I can't think of anything. As for the symptoms of hearing loss, not being able to think of anything, blurred vision, it just happened around 7:30 p.m.

[@kel5944]

Call 911?

[@25STB2]

@kel5944 Some countries have mind control technology and use it to destroy other countries. Observe the chaos happening in developing countries all over the world.

[@NorthWetCoast]

After today, bye, bye even 3%. Inflation is back and rates will go up.

[@muhammadmudasser5082]

From greedy hawks

[@abhijitpal7750]

No tension U.S. Federal Reserve Chairman. First week. $ 178 billion. second week. $ 112 billion. Third week. $ 201 billion. and fourth week only $ 078 billion. in a month. artificial super intelligence world.

[@chiquita683]

A place in the middle east

[@AlmaMercer]

😡😡😡😡

[@andrewweis5857]

Grimm's Fairy Tales?

[@WealthyHealthyPro]

Study Bitcoin

[@玪玪-v2m]

China is oddly zero inflation😂😂😂

[@menails]

Every talking fed bad thing when savings rate is 15% when inflation from tarriffs hits i expect massive slow down the consumer from the new tarriffs. Then stilumus some point soon everyone will panic everything economical off rails think see market i wont suprise circuit breakers going effect monday. Now every lack of demand okay slow inflation etc. I think overall effect much higher slowing than folks expect. Depending exactly how hard effect of saturday is two things sticker shock on consumers aka how much fast consumer close their wallets and how fast goes through economices of the nation. So question does dow in front of reality or behind because here thing tarriffs canada and mexico consumers feel sticker shock one three things consumer doesnt freak for several weeks. One sign exactly how stronger economics where under biden folks realize but price increases will hit might as long as 90 days but they will average consumer. Consumer and dow react within days both going down here even tarriffs go away forever prices come down point consumers possibly return. So inflation will be done deal. No one honest 95% inflation during covid comes two places the tarriffs hitting prices and most dont trump inflation but fed been masssive deflation due covid. Better or worse stilumus made Folks that really weren't flashed because of the deflation Feel flush And then everyone was pushed because everyone was terrified of the economy to spend that extra flushness No the problem here is That2 fold 218That There was no mechanism To account for inflation from the stimulus When the quantitative easing stopped And started to come back to the fed There is no way To pull back enough stimulus of the quantitative easing To slow the inflation Due to the tariff cost So as the economy recovered You had all this Superfluous Stimulus cash cash money in people's pockets to spend And there was already enough cash in the system to keep the system running because the fed was terrified the economy was gonna fall completely apart OK so here's the double edge sword Have the stimulus not worked As intended The flip side of this is Once you got the stimulus what it was Intended to do which was get the man restarted That That then you started the engine of inflation And once you got the engine of inflation started it's very hard to Keep the inflation engine under control All but for the feds would have happened All but for the feds would have happened so It's a double edge short here because The feds would have never eat the economic quantitative easy have the stimulus not had the desired effect AKA citizens had pocketed their money and not spent it We would have gotten additional Quantitative easing until demand returns On it's own Which could have been6 months a year 2 years 2 years Nobody really knows So but here is the thing The fed had to take quantity using back in it some point But Had the fed taken in quantitative easing before We had real inflation And to the feds credit I mean I could have seen this as large as the American economy is I could see waiting until we had 10% inflation before Easter Pulling the gas back OK because the thing of it is that Quantitative easing out of the economy Is the equivalent of pulling the gas back So as you pull gas back out of the system You don't want to kill the engine OK A lot harder than people think Think of it as weeniening a combustion engine A combustion engine While that combustion engine is running. I can tell you what's gonna happen now1st of all dow what hell dc doing.! There are consumers who are gonna say oh my god that's right. There's the rest of the other consumers who are too busy spending money to realize that their prices are going up on them while they're spending money cause they're spending it on essentials Meanwhile inflation is running away OK So now eventually The essential Spending consumers are gonna go my god this is so expensive I can't afford it They're going to do what Logical logical person would do which is cut their wallet off. For a while that'll that'll probably all be alright But the problem is demand is gonna drop so much That everyone economically is gonna go oh my god the ceiling is falling Which in a way it is finally. So then feds drop rates make certain running engine doesnt run out of gas. But fed struggle keep engine average consumers going what the hell i need help. Massively dow okay going stilumus worse over and then usa hit one or two huge shocks one debt crisis. And or also real estate bubble. It potentional as bad as 1929 or worse. Second fed pulling out all stops going to get engine continued run even very roughly then massive conflict in asia. Stilumus right before or right after. Six months to year economy recover from conflict economy finally fed start slow down on 0% interest rates and Quantitative easing and Quantitative easing clearing balance contraction but fed wont stop Quantitative easing until infla

[@JasvirAher]

As an investment enthusiast, I often wonder how top-level investors are able to become millionaires through investing. I have a significant amount of capital to start with, but I'm unsure about the strategies and direct I should take to help me generate substantial profits like some people are this season.

[@VicoYuni]

I’m not in a position to offer financial advice, but given the significant amount of capital you're working with, it would be wise to consult a financial advisor who can guide you in developing a strategy tailored to your goals and risk tolerance.

[@muomu]

现在驱动美国的只有恐惧，而非理性。对通胀的恐惧，对中国的恐惧，对股市下跌的恐惧。

[@muomu]

DeepSeek创始人说过一句话，创新来自于信心，这就是美国缺乏的。不然谁会相信AI的发展是依靠GPU推动

[@brandonharley44]

huh?