🔴 Ep 911: The Fed’s Inflation Target Remains Elusive

by | Aug 23, 2023 | Invest During Inflation | 33 comments




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The Federal Reserve, also known as the Fed, has set an inflation target for itself, but it seems increasingly unlikely that it will ever reach that goal. In episode 911 of our economic analysis podcast, we delve into the reasons behind this.

The Fed’s inflation target is to achieve a consistent annual rate of 2%. This target is based on the belief that a moderate level of inflation is beneficial for economic growth and stability. However, despite the efforts made by the central bank, inflation has been persistently below this target for several years.

One reason why the Fed struggles to attain their desired level of inflation is the sluggishness of the economy. Inflation is typically a sign of a healthy and growing economy, but in recent years, economic growth has been lackluster. This is partly due to structural issues, such as a declining labor force participation rate and a slow rate of technological innovation, which have hindered overall economic expansion.

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Additionally, the global economy has also played a role in hampering the Fed’s inflation target. With the rise of international trade and globalization, domestic inflation is now significantly influenced by external factors. A slowdown in global economic growth, trade disputes, and currency fluctuations can all dampen inflationary pressures in the United States.

Furthermore, the implementation of unconventional monetary policy measures in the aftermath of the 2008 financial crisis has had unintended consequences. Quantitative easing and near-zero interest rates were put in place to stimulate the economy and encourage borrowing and spending. However, these measures seem to have created a new normal of low inflation expectations among businesses and consumers. Consequently, any uptick in prices is met with caution, limiting the potential for sustained inflationary pressure.

The COVID-19 pandemic has further exacerbated the Fed’s struggles in hitting its target. The pandemic-induced economic downturn created a deflationary environment, with businesses struggling to stay afloat and consumers cautious about spending. As the economy emerges from the pandemic, there is a risk of inflationary pressures building up due to fiscal stimulus, supply chain disruptions, and pent-up consumer demand. However, these factors may be temporary, and the underlying structural issues already mentioned may still impede sustained inflation.

The challenges the Fed faces in hitting its inflation target highlight the limitations of monetary policy alone in driving inflation. While the central bank can influence interest rates, it cannot control factors such as productivity gains, technological advancements, or global economic trends. A broader approach involving fiscal policy, structural reforms, and international cooperation may be necessary to address the underlying issues and achieve the desired inflation goal.

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In conclusion, the Fed’s inflation target of 2% appears increasingly elusive. Structural issues, globalization, unconventional monetary policy measures, and the COVID-19 pandemic have all contributed to the persistent shortfall in inflation. As the central bank continues its efforts to stimulate the economy, it must acknowledge the limitations of monetary policy and consider complementary measures to support its inflation target.

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33 Comments

  1. Rochelle Trembly

    Okay this is good, but With inflation running at a four-decade high, a Recession is now the ‘most likely outcome for the economy. How can I grow my portfolio to outpace inflation and maintain a successful long-term strategy? I have been reading of investors making about $250k profit in this current crashing market, and I need ideas on how to achieve similar profits

  2. Jose Lopez

    Welcome back home to PR, the island of the music…!

  3. DB Edwards

    BTW TRUMP IS A CRAZY

  4. DB Edwards

    Lawyers hired to LIE. OY!!!

  5. DB Edwards

    TRUMP INCITED A RIOT ON 6 JANUARY 2020. HE IS GUILTY OF SEDITION AND INSURRECTION AND WIL BE RELOCATED TO SING SING. FOUR CITIZENS DIED BY SUICIDE OR OTHERWISE AS THE RESULT OF THE CAPITOL ASSAULT

  6. DB Edwards

    Peter is the Maven. The MASTER. THE RABBI! SIT BACK AND LEARN

  7. Yawzer Doink-a-Sore-as

    “Your lying political opponent is going to beat you” Classic Schiff! I love him!

  8. Mike n Tam

    Anyone who thinks the 2020 election was free and fair, is either not paying attention, or is lying. Just the Russia collusion lie was enough to sway the election, but when you add in the laptop, the changes made to the voting process, and all the shenanigans in every swing state, then it’s clear, Biden is illegitimate. Democrats are just too insane and to unprincipled to admit it. The modern democrat and their pet rinos, are the most corrupt and destructive force, currently in existence.

  9. Mike n Tam

    Anyone who can support the democrats at this point, has serious issues, and is an unprincipled person, driven by hate and ignorance. Good people do not behave the way democrats are. Twisted and evil do

  10. Goldcic

    Dance like the Calvin Coolidge Peace Dollar era until Oct. 1929 & the Great Deprression Hoover era.

  11. Gregory Sagegreene

    They moved me over to NumNuts a year ago without my permission, and I haven't signed up. Their email pleadings get less attention from me than a credit card dunning letter after 2008.
    For my 3 (decent) AS degrees, sheltering in place on Obama's money from Bush's depression,
    I've now got 5 years to date on forbearance
    and 5 years as an aged semi truck driver.
    I literally bottomed in February in the freight recession, after half a decade of all that effort. And I've had 6 months of mental depression since then, worrying until literally the crunch moment of my 62nd birthday today. You don't talk about embedded inflation, where all costs have doubled and are not going down ever. I was considering suicide again recently, for the second time in two recessions, until I found that a) I had the money for a green card renewal and b) it wasn't on my birthday today but due rather in April of next year. So I'm marginally in the eye again. But whaddya' think I'm gonna' do? 24 years in the U.S. from Australia, and all the wisdom I've found is you can be crushed down through the cracks and there will always be a paucity of opportunity in America to try to get back up – regardless of all the grit and perseverance you can muster. 15 years took me from a middle class programmer to long-term homeless, a cashier sleeping in a donated car to college grad done by alternating between motels and fields, and finally to a debt-ridden semi truck driver. Whaddya' think I'm gonna' do? I've now got 9 months till they come for my student money, and 8 months till I make a decision on renewing a generation old green card. America the Great!
    I literally do not have the time to endure another
    4 years till the end of a 4th Turn. I'm exceptional,
    but even I likely won't make it. Why must the government be saved from it's debts, but not the people? Saving up for a flight back to a bum sleeping on a Tassie beach is definitely an option.

  12. Giller Heston

    We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest.

  13. Sandwich King

    Inflation is the most insidious theft as it transfers wealth and purchasing power from those with the least to those with the most. Yet it is not only legal, it’s institutionalized in America. We have a crime syndicate in charge.

  14. David Barton

    Can you even upload in 4k from PR?

  15. Frothy Beaver

    $4.50 gas is cool. Not as cool as $5 a gal but ya know the thing. Al hail build back better.

  16. Dwight Dopilka

    Glad to see you back Peter and thank you for increasing the audio level!

  17. Zak

    Randomly missed your voice lol

  18. Xelzbrod...

    Best Podcast ever thank you,Icant say anything more,I don't want to put myself in jail.

  19. Nurse Jean

    How are truck drivers going to be eliminated?

  20. Maxine Oliveira

    love your channel Peter,keep up the great work

  21. Gregory Thomas

    LOL! "Normal transition of power" Trump is the only President in US history who did not hand off power and acknowledge. He called for the VP to reject the results which is a an institutional threat. He then also pressured states to "find" more votes. He also failed to condemn the violent overthrow of government on January 6th and on top of that said he would pardon those involved in the sedition. Yeah, sounds pretty normal Peter. Hunter in jail, sure he is no good too. But you sound like a fool for an otherwise smart guy.

  22. Tom Ryan

    I heard the same guys who shorted the housing market from 2005 to 2008 are now shorting the US economy and stock market. It's coming…..

  23. Aziz Einas

    I'm not kidding when I say that the market crash and high inflation have me really stressed out and worried about retirement. I've been in the red for a while now and although people say these crisis has it perks, I'm losing my mind but I get it Investing is a long-term game, so focus on the long run.

  24. Alexander Webber

    With inflation at 3.18%, I'm looking to enter the market now and ride it out as the economy improves. I'm putting together a $350,000 portfolio. Do you have any stock recommendations?

  25. uawsux

    I started studying Erwin shift long time ago I even quit paying my taxes and studied why we are under admiral teacher restriction the Statue of Liberty in the harbor is a fraud but I don't understand unless I missed it somewhere why you don't bring out that raising interest rates is inflationary it does not fight inflation businesses have to refinance their debt every month or so it gets more expensive they have to raise their prices so it destroys currency but it makes it more expensive so funny

  26. AB

    Peter u need to fact check. The classified docs crimes are real. So is his rape case. The dude is a rapist. What else do we need to know?

  27. ILikeSports89

    The government needs to step in and fix what the fed has done. Tax single family home investment properties; Correct the housing market and eliminate inflation.

  28. Deborah Clark

    Okay this is good, but With inflation running at a four-decade high, a Recession is now the ‘most likely outcome for the economy. How can I grow my portfolio to outpace inflation and maintain a successful long-term strategy? I have been reading of investors making about $250k profit in this current crashing market, and I need ideas on how to achieve similar profits

  29. Mr. Marvelous Mess

    I remember when Powell said he had to keep interests rates low to help minorities. Which of course has hurt minorities the most with inflation. He's a liar or an idiot.

  30. Russell Takemoto

    Love the way Peter breaks down politics and our corrupt doj

  31. Gregory Thomas

    I think the podcast format was better. The video is worthless and much less polished.

  32. b1burck

    If you want a healthy sunscreen..use Cold pressed RASPBERRY SEED OIL .. you can even add a little emu and coconut oil with it. It works 100% and it's all natural. Try to eat a Mediterranean diet as well with olive oil

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