Fed Should Study Higher Inflation Target, Liberal Economists SayBy
Stiglitz, Furman, Kocherlakota among those making the call
Group wants Fed to set up a commission to study the issue
A group of 22 progressive economists including Nobel Prize winner Joseph Stiglitz urged the Federal Reserve to appoint a blue-ribbon commission to consider raising its 2 percent inflation target.
In a letter to Chair Janet Yellen and the rest of the Fed board released on Friday, the economists argued that a higher objective would give the central bank more room to combat downturns in the economy without unduly hurting Americans’ living standards.
The group includes former U.S. central bank officials Narayana Kocherlakota, who led the Minneapolis Fed, and Joseph Gagnon, as well as academics Brad DeLong of the University of California at Berkeley, and Dartmouth College’s David Blanchflower. Jason Furman, Jared Bernstein and Gene Sperling, all of whom served under President Barack Obama, also signed.
The Fed formally adopted its 2 percent goal in January 2012. Inflation -- as measured by the personal consumption expenditure price index -- has been consistently below that level since then, except for a brief period in 2012 and this past February. The index in April was 1.7 percent higher than a year earlier.
San Francisco Fed President John Williams has said the central bank should rethink its inflation target for the long-run. So too has former Fed Chairman Ben Bernanke.
The letter was pulled together by Fed Up, a coalition of community organizations, labor unions and policy experts that advocates for reform of the central bank. The coalition is also organizing demonstrations on June 12 at Fed facilities in Washington, New York and Philadelphia to protest the central bank’s recent tightening of monetary policy.
Yellen and her colleagues are widely expected to raise interest rates for the second time this year at their June 13-14 meeting.