Wednesday, February 24, 2010

Our Inflation Target is what?

OK, so the Fed has an unofficial inflation target of 2%, right?

Except, the Fed's projection of inflation for this year is 1.4-1.7%. And the Fed is also taking steps to slow the economy. But if I'm a rational agent, I'm not sure why I wouldn't expect prices to rise at the lower end or below of the Fed's range.

So, the Fed essentially has an inflation target of 1.4%, whether it knows this or not. Complete madness.

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