How High Does the Fed Want Inflation to Go?

The video discusses the Federal Reserve's approach to managing inflation, focusing on the challenges of achieving a 2% target. It explores historical debates on inflation targets, the importance of having a buffer against deflation, and the potential for allowing inflation to rise slightly above 2%. The discussion also covers the link between wage growth and inflation, emphasizing the need for wage growth to return to normal levels to complete the economic recovery.

What is the current debate regarding the Federal Reserve's inflation target?

• Whether to increase the target to 5%

• Whether to lower the target to 1%

• Whether to maintain the target at 2% or allow it to rise

• Whether to eliminate the target altogether

When did the Federal Reserve formally announce its inflation target?

• In 2015

• In the early 1960s

• In 2007

• In 1996

Why do central banks believe a little inflation is necessary?

• To reduce the value of currency

• To increase the cost of living

• To make goods more expensive

• To create room to avoid deflation and allow interest rate cuts during crises

What is the Federal Reserve's current approach to inflation as it nears 2%?

• To decrease interest rates to zero

• To allow a gradual increase and possibly overshoot slightly

• To ignore inflation rates

• To immediately stop any further increase

What is the Federal Reserve's goal regarding wage growth?

• To keep wages stagnant

• To reduce wages to control inflation

• To return wage growth to normal levels after years of stagnation

• To increase wages by 10% annually