The Fed first enunciated its 2% inflation target in 2012. It focuses on the core PCE, which clearly understates actual consumer inflation using mechanics which I have recently covered here and in numerous past posts. Using a less biased measure such as the Producer Price Index for Finished Consumer Goods, inflation has run at a compound growth rate of +2.1%. That slightly exceeds the Fed's target ever since it was first established.

... [But] The Fed focuses on Core PCE, which is an even more suppressed measure. The Fed has thus been able to pretend that inflation has been well below the target of 2%. Core PCE has a compound growth rate of 1.5% since 2012. That has been one of the Fed's main reasons for keeping interest rates near zero.

Not only is there no evidence that super low interest rates stimulate consumer inflation, there is plenty of evidence that ZIRP actually suppresses consumer prices... Money printing (QE) has stimulated inflation, just not the kind that economists define as inflation. They keep their focus strictly on the CPI and PCE, which are arbitrary baskets of consumption items designed to understate actual consumer inflation... The government, economists, and the Wall Street media make no pretense of measuring monetary inflation or asset inflation. Economists and policymakers completely ignore these kinds of inflation. In fact, asset inflation isn't even called "inflation." It's called "appreciation" or "gains" or "growth." It all sounds very benign.

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