Two Indicators: The 2% inflation target

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 13 January 2023

⏱️ 18 minutes

🔗️ Recording | iTunes | RSS

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Summary

If the Fed had a mantra to go along with its mandate, it might well be "two percent." We look into how that became the target inflation rate, why some economists are calling for a change and how the inflation rate becomes unanchored.

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Transcript

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0:00.0	This is Planet Money from NPR.
0:04.0	I was thinking the other day about my favorite contemporary opera.
0:10.0	Wait, you have a favorite contemporary opera?
0:13.0	Yeah, and you will too, Whalen, after I play you a little bit of Philip Glasses' Einstein on the beach.
0:19.0	One, two, three, four, one, two, three, four, five, six, one, two, three, four, five, six, seven, eight, one.
0:30.0	Nice, it's like a post-modern Sesame Street.
0:33.0	What I love about it is that after a few minutes the numbers don't mean anything anymore.
0:38.0	It's like an incantation.
0:40.0	I was thinking about this after listening to the Chair of the Federal Reserve, J. Powell.
0:45.0	Two percent inflation goal, we're going to keep our inflation target at 2 percent.
0:49.0	We're going to use our tools to get inflation back to 2 percent.
0:52.0	Two is definitely the favorite number of the fed these days.
0:55.0	They are going to do anything they can to bring inflation down to a modest 2 percent.
1:00.0	And Powell said 2 percent over and over again, like Philip Glass, 17 times I counted until I was under its spell.
1:10.0	2 percent, 2 percent, 2 percent.
1:13.0	2 percent, 2 percent, 2 percent, 2 percent, 2 percent, 2 percent.
1:22.0	Wow, now I have a new favorite opera.
1:26.0	Thank you so much.
1:28.0	As I was cutting together all the 2 percent, I kept thinking why?
1:32.0	Why 2 percent?
1:33.0	There are so many other numbers and songs for that matter.
1:37.0	Why not bring inflation down to...
	...

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