The Real Reason The Fed Aims For 2% Inflation

During his recent interview on The Acquirers Podcast with Tobias, Colin Lancaster, author of Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader discussed The Real Reason The Fed Aims For 2% Inflation. Here’s an excerpt from the interview:

Tobias: Let me ask you a question. Why is 2% inflation a good thing and inflation above that number a bad thing?

Colin: I really think that was an artificially generated number. I don’t think that there is any great reason for 2% to be this this magical marker. I think the Fed ended up coming to that number, because it’s something that they felt that they could deliver on. But the problem is, they haven’t. So, I don’t think there is anything special about that number.

Tobias: It might be a number that they can sell to people to– [crosstalk]

Colin: Yeah, it sounds benign. It sounds easy. 2% sounds like you can tolerate it. There shouldn’t be big problems that develop from that. So, I think you’re probably right. I think it’s from a marketing perspective, it’s a bit of an easy sell.