The final product of those efforts — and all those before — was the January 2012 Statement on Longer-Run Goals and Monetary Policy Strategy, which introduced the 2 percent inflation target to the public: “The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate.” … The committee opted for the specific 2 percent target, even though many participants over the years had advocated for a range. Lacker has cited two potential explanations for this shift. First, advocates of a single numerical target — often called a “point target” — thought that a range might imply the committee was satisfied with any number within it, even if variations within the range were economically significant. Second, Lacker notes that at that time during the financial crisis, inflation was running below 2 percent. That meant that “a range wasn’t as dovish as a point target,” he suggests. “If we say 2 percent, that will provide more impetus for expansive policy.”
I mean, I always wondered, and here’s the history. For much of the FEDs existence it operated under guidelines. The establishment of a fixed number came very recently.
Quote Citation: Matthew Wells, “The Origins of the 2 Percent Inflation Target | Richmond Fed”, First/Second Quarter 2024, https://www.richmondfed.org/publications/research/econ_focus/2024/q1_q2_federal_reserve