Fed Wants Inflation But Their Actions Are Deflationary

A recent CNBC article states the Fed will make a major commitment to ramping up inflation. How is this different than the past decade of promises for higher inflation? More importantly, while the Fed may want inflation, their very actions continue to be deflationary.

The Fed Has A Plan

“In the next few months, the Federal Reserve will be solidifying a policy outline that would commit it to low rates for years as it pursues an agenda of higher inflation and a return to the full employment picture that vanished as the coronavirus pandemic hit.

Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.

To achieve that goal, officials would pledge not to raise interest rates until both the inflation and employment targets are hit.” – CNBC

Such certainly sounds familiar.

“The Federal Reserve took the historic step on Wednesday of setting an inflation target that brings the Fed in line with many of the world’s other major central banks.

In its first-ever ‘longer-run goals and policy strategy’ statement, the U.S. central bank said an inflation rate of 2 percent best aligned with its congressionally mandated goals of price stability and full employment.”– Reuters Reporting On Ben Bernanke’s Fed Policy Statement January 26, 2012