Section 4.4 - Q6 - What Does Project 2025 Say?

“Inflation-Targeting Rules. Inflation targeting is the current de facto Federal Reserve rule. Under inflation targeting, the Federal Reserve chooses a target inflation rate—essentially the highest it thinks the public will accept—and then tries to engineer the money supply to achieve that goal.”

Citation: Project 2025, Section 4.4: Federal Reserve, Paul Winfree, page 771, paragraph 2

Context:

This is the fourth of a number of proposals Winfree suggests for limiting the power of the Federal Reserve’s role, in the absence of abolishing it entirely (in decreasing order of preference/effectiveness.)

This statement is mostly accurate. The Fed doesn’t choose the “highest” inflation rate it thinks the public will accept. A more precise description would be that the Fed sets a specific target inflation rate (commonly 2%) based on its assessment of optimal economic conditions, rather than the “highest acceptable rate.” This target aims to promote price stability while allowing for moderate economic growth.

For the pros and cons of inflation-targeting rules, see the analysis below.

Full contextual analysis of Section 4.4: Federal Reserve here.

Section: Section 4.4: Federal Reserve

Categories: Economy, Inflation, The Federal Reserve