Not all of his colleagues are on board yet, according to projections they published after their most recent meeting on March 20, which showed many still believe aiming for 2 percent or less over the next few years would be a better plan.
But intentionally pursuing above-target inflation is, in effect, what many of the alternative strategies under consideration as part of the upcoming review would call for. The idea is that higher inflation expectations over time would allow the Fed to raise rates more than they would otherwise be able to, giving them more room to cut rates in a downturn.
An analysis of FOMC meeting transcripts by San Francisco Fed economists, published Monday to the bank’s website, underscored the extent to which the current debate goes back many years. It found that before the financial crisis, FOMC participants preferred a 1.5 percent inflation rate. After the crisis, that number shifted to 2 percent.
This article provided by Bloomberg News.