Paul Krugman thinks the Federal Reserve should change its inflation target to 3%, but Mohamed El-Erian says there's little chance of that happening.
Federal Reserve Board Chair Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee in Washington, U.S., July 27, 2022.Paul Krugman backed calls for the Fed to change its inflation target to 3% – but Mohamed El-Erian says there's little chance of that happening."It is very hard for a central bank to change an inflation target when it has been missing it so consistently," El-Erian said.
Paul Krugman thinks the Federal Reserve should bump up its inflation target to 3% – but Mohamed El-Erian says there's no chance. The two economists' comments come ahead of Fed chair Jerome Powell's speech at the 2023 Jackson Hole Economic Symposium on Friday. "I agree with Jason Furman's call for a 3% inflation target — the rationale for 2% has been overtaken by a couple of decades' experience ," Nobel economist KrugmanThe Fed has been raising interest rates at the fastest pace since the 1980s over the past six quarters – from near zero to upward of 5% – in a bid to cool inflation down to its 2% target.
The aggressive tightening cycle has managed to slow down the annual pace of consumer-price increases from last year's highs above 9% to 3.2% through July, but investors are prepared for further rate increases this year as the central bank stays adamant on meeting its target.
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