The Fed Inflation Target Should Be Zero
August 26, 2026
by William P. Meyers

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Not 2%

The Federal Reserve System's target inflation rate is 2% per year.

That means that even if it meets its target, on average, if you have dollars sitting around, compared to the bundled cost of goods and services in America, you are being ripped off by 2% per year.

There is a rational for this target, but it is BS. It is propaganda. If you care, you can find the explanation here: Federal Reserve 2% Inflation Policy.

Note that they actually say one of their two goals is price stability. That would mean 0% inflation (which is also 0% deflation!). Their dodge is about maximizing employment. But if you have been alive any reasonable period of time, you know they also fail to maximize employment, much less ensure a living wage for those employed. Given that Federal Reserve personel are bankers, and their advisors are economists (PhD's and all), you can understand why they might be maximizing something like say, upper-class incomes rather than what is good for more typical workers.

But here is the pragmatic data that shows it is all a piled mix of wishful thinking and banker propaganda: on average, they don't hit that 2% goal.

Admittedly, the Board of Governors does not want inflation to get out of hand. But they don't put too much effort into either hitting the 2% inflation goal or guaranteeing full employment. [Caveat: other powerful people may influence this, largely through federal government policies like high deficits, low taxes on the rich, and high taxes on working Americans.]

Here, I will use the Fed's own figures. Note there are differing measures of inflation. I am using the PCE (Personal Consumption Expenditures Price Index):

[source]

This graph is year to year, each month. Clearly for the entire span of years covered it has averaged well over 2%.

By the way, the 2% target became official in 2012, but was pragmatically adopted in the 1990s.

One outside comment: "There isn’t any strong theoretical or empirical evidence for an inflation target of exactly 2%. The figure’s origin is a bit murky, but some reports suggest it simply came from a casual remark made by the New Zealand finance minister back in the late 1980s during a TV interview." [Fed wants inflation to get down to 2% – but why not target 3%? Or 0%?]

We are supposed to be living in a Democracy. The people, through their Congress, should decide the inflation target rate. My vote is for honesty and stability, for 0% average inflation.