The Fed's 2.0 Percent Inflation Target is an Average Not a Ceiling

This is an important point to remember in coverage of the Federal Reserve Board's plans on interest rates. Former Fed Chair Janet Yellen repeatedly reminded the public that the 2.0 percent target is intended to be an average.

The inflation rate, as measured by the consumer price expenditure deflator, has been under 2.0 percent for most of the last six years. This means the Fed should be prepared to allow the rate to rise modestly above 2.0 percent given its target. We will have a recession at...