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The Fed's 2% inflation target is a source of growing liberal discontent
- oldpersonintx 3y ago[dead]
- creer 3y agoUS interest rates, inflation definitions and targets, unemployement definitions and rates - are key levers for trying to regulate and control the US economy (and with much influence still on the rest of the world). Yes there are many other things linked partially or related to these. - such as election year statistics, real estate and the banks that hold the corresponding loans, service of US debt, the value of the US dollar, etc, etc. That makes these definitions and targets more important and interesting, not less! They are also a part of the economy that's rather understandable to engineers. And this one is a very decent article.
- jfengel 3y agoThe Fed does have an informal unemployment target, the "natural unemployment rate" of around 4%. Like the 2% target, it's also kind of a scientific-wild-ass-guess. In both cases, there's a reasonable argument that you don't want it at zero, which tends to be too rigid for maximum economic benefit. We're currently at 3.9%, right about that level. I don't think you're going to radically improve the quality of the economy by tweaking the target numbers. The federal funds rate is a very crude tool. There are many, many problems with employment in the US, and I don't think you can fix them with that tool. The tools we need belong to Congress. And yeah, Congress is a s*tshow. But unfortunately we can't rely on the Fed to fix them.