Bill Ackman, a well-known hedge fund manager, believes that the 2% inflation target set by the Federal Reserve (Fed) is no longer reliable. To achieve long-term growth, an inflation target of around 3% is better Strategy.
After the Federal Reserve released its interest rate decision, Aikman tweeted on Wednesday (14th) that companies need price stability, but they can grow in a stable inflation environment of 3%.
“The Fed’s inflation target is no longer reliable,” he said. “Deglobalization, the transition to alternative energy sources, having to pay workers higher wages, lower risk, shorter supply chains all lead to inflation. The Fed It is not possible to change the target now, but it is possible to do so in the future.”
The Federal Reserve raised interest rates by 2 yards on Wednesday as expected. Chairman Jerome Powell said in a press conference after the meeting that he will continue to raise interest rates until inflation falls back to the target level of 2%.
Asked whether he would consider raising the inflation target, Powell said: “We would not consider it under any circumstances. We would maintain the inflation target at 2 percent and use the tools to bring inflation back down.” But he acknowledged there may be a long-term plan for the central bank to revisit its inflation target.
Ekman believes that without a severe recession that destroys employment, the Fed will not be able to achieve its 2% inflation target, and even if it falls back to 2%, it will not be stable at this level for a long time. In the long run, accepting an inflation target of around 3% is a better strategy for strong economic and employment growth.
Some economists believe that if the Fed raised its inflation target, it would eliminate the need for as many rate hikes and help ease pain in the labor market, but Fed officials generally opposed any move to change the target. Because changing the target in the face of unfavorable inflation data will make the market question the central bank’s commitment to control price pressures, which will damage the central bank’s credibility.