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Imagine having dinner with Fed chair Jay Powell. You ask him about the Fed’s inflation target....

Imagine having dinner with Fed chair Jay Powell. You ask him about the Fed’s inflation target. What answer do you expect? What justification do you expect?

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The Fed's inflation target would go beyond the usual target of 2% as it is believed that the inflation rates have been under shooting  the expected rates in recent times. This is because if inflation is raised, the interest rates may decline, which would lead to increase in economic activity. As per the Phillips curve, it is clear that a slightly higher inflation rate will reduce unemployment rates in the country. In the current situation, unemployment is increasing widely and reducing its effects is the need of the hour.

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