. . . that the Fed wants 2% inflation?
I was about to make fun of this quotation from Ryan Avent:
Meanwhile, the Fed got little to worry it on the inflation front. Its favoured inflation measure—the core price index for personal consumption expenditures—came in at a 0.4% annual growth rate. That measure has declined steadily from the fourth quarter of last year.
And then I thought to myself; don’t be a smart-ass. I’ll bet most macroeconomists would read that without batting an eye. Sure the Fed claims to want 2% inflation. But if that were true then economists and reporters would say “increasingly bad news on the inflation front,” not good news. The fact that they don’t means that at some level everyone understands the Fed wants more NGDP, and would prefer any increase in NGDP to be as much real growth and as little inflation as possible. So why can’t we drop the pretence that they want 2% inflation, and start talking about NGDP? Why can’t we say what we mean?
PS. I’ll start being a smart-ass again in my next post—on Paul Krugman.