Blog: Is the Fed's 2% Target a Pipe Dream?

At his press conference last week, Fed Chair, Jerome Powell, said that he was confident the Fed would reach it's 2% inflation target "over time." We should not only be skeptical of this claim, but also of the relevance of the 2% target. Paul Volker, the "inflation killer," was happy with 4% when he stopped tightening. Alan Greenspan achieved 2% or less PCE inflation only 32% of the time over 18.5 years.

It's also important to remember that neither Volker nor Greenspan had an inflation target, and there is no target in the Fed's legal mandate. Both Volker and Greenspan spoke about achieving "price stability" as their goal. So where did this 2% goal come from? Ben Bernanke.