Fed's 2% inflation target faces growing liberal pressure, but Powell signals commitment to global standard

The Fed's 2% inflation target is formally backed by written policy, but is a source of growing liberal discontent and political pressure on Fed Chair Powell.

The path to 2% began with an offhand comment from a New Zealand central banker in 1988; it became a global standard that the Fed adopted in 2012 despite some discomfort from Democrats.

Some Democrats want a higher inflation target or an added labor market target. Powell strongly signaled the 2% target will remain in place as the global standard.

The target has led to criticism that the Fed cares more about inflation than maximum employment, its other mandate. Adding an unemployment rate target may not be straightforward.

With forecasts of few if any rate cuts in 2024 despite Democratic calls for them, the 2% target could grow as a political issue in the months ahead.