Will the Fed Move the Goalposts on Inflation?

In “The Fed Should Carefully Aim for a Higher Inflation Target” (op-ed, Aug. 21), Jason Furman seems to have forgotten the Federal Reserve’s unfortunate recent experience with changing inflation targets.

In August 2020, with the aim of increasing inflation to its 2% target on a sustainable basis, the Fed shifted from a fixed inflation target to a flexible targeting framework, under which it would temporarily tolerate inflation higher than 2%. It did so only to find inflation surging to a multidecade high of more than 9% by June 2022. That surge left the Fed’s inflation-fighting credibility in tatters.

With the Fed still far from regaining that credibility, and given its dubious ability to forecast inflation accurately, it would seem far too early for the Fed to think of yet another change to its inflation-targeting framework.

Desmond Lachman

American Enterprise Institute

Washington

Mr. Furman’s proposal should be treated as a trial balloon or, worse, a warning to investors, businesses and households. When anyone in Washington misses a target, they simply move the goalposts.

While there is nothing magical in a 2% inflation target, there is something worse about accepting a 30% a decade decline in purchasing power. These are real costs felt by American households, with lower- and fixed-income families getting hit the hardest. One fair response is that higher inflation eases the servicing of all debts, but this is what enablers do—they rationalize bad behavior until it becomes the norm.

The bond market is voting emphatically. Long-term Treasury yields are at their highest levels in 15 years, unconvinced that inflation is transitory. After a long slumber, the vigilantes are back.

John Carlson

Boulder, Colo.