Congress Should Set the Fed’s Inflation Target—Ideally at Zero
The Federal Reserve’s relentless pursuit of 2% inflation creates more problems than it solves. The 2% target has become gospel for central bankers. But as former Fed Chairman Paul Volcker points out in his new memoir, no economic theory or evidence supports the claim that a little inflation greases the economic wheels or reduces the risks of depressions. In fact, monetary policies that aim for 2% inflation risk contributing to financial bubbles that can trigger real economic collapse when they burst.