The Fed's Two Percent Inflation Target

Sebastian Mallaby had a in the WaPo on the Fed's 2.0 percent inflation target. Mallaby argues that the 2.0 percent target is arbitrary and makes the case that moving to a higher inflation target, as recently suggested by San Francisco bank president John Williams, would be desirable.

While Mallaby makes some good points, he also gets some items wrong. First, he notes the Fed's decision to ignore the growth of the housing bubble in the last decade. He said that they viewed the issue of...