This is the Cato Daily Podcast for Wednesday, October 5th, 2022.

I'm Caleb Brown.

Much of the reasoning surrounding inflation right now is highly motivated, to say the least.

Cato's Norbert Michelle argues that the Fed doesn't have to drive the price level back down to pre-pandemic levels

for inflation to return to the neighborhood of a 2% target.

We spoke last week.

Norbert, I've spoken to several people about the Federal Reserve

and its target inflation rate of at or about 2%, which it, of course, our inflation has been

well below that for a long time and then went way, way above that. And as far as we know will be well above 2% for a long time.

And some people who have complained about Fed policy, especially in recent months or the last two years or so,

have said, look, based on what the Fed has been saying, they're never getting back to 2%,

or at least that's what their policy looks like.

Right. Some people are saying that. The interesting thing is it depends on exactly how you measure it.

And what the Fed has done,

coincidentally right before all this happened,

is blurred the lines completely on how they would measure that.

In other words, you could measure it from some random point

in the past to some random point in the future, or you could measure it from today to one year out or

something else and the numbers that you get when you do those different calculations

could be very different, especially right now in this higher inflation period.

So case and point, inflation could stay perfectly flat month the month for almost another full year and the annual rate of inflation will stay over 3% the whole time.

And that's just because we had a big spike.

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