Don’t Let the Fed Pause Become a Fed Surrender to a Higher Inflation Target Rate

Many voices on the left are calling for the 2 percent inflation target to be increased, but voters should object

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The Federal Reserve announced on June 14 that it has “paused” its relentless pace of interest-rate hikes for the first time in 15 months.  In March,2022, the Fed commenced  hikes, then continued as follows:

Fed Meeting	Rate Increase	Target Rate
March 15–16, 2022	+25 basis points	0.25–0.5 percent
May 3–4, 2022	+50 basis points	0.75–1.0 percent
June 14–15, 2022	+75 basis points	1.50–1.75 percent
July 26–27, 2022	+75 basis points	2.25–2.5 percent
Sept. 20–21, 2022	+75 basis points	3.0–3.25 percent
Nov. 1–2, 2022	+75 basis points	3.75–4.0 percent
Dec. 13–14, 2022	+50 basis points	4.25–4.5 percent
Jan. 31–Feb. 1, 2023	+25 basis points	4.5–4.75 percent
March 21–22, 2023	+25 basis points	4.75–5.0 percent
May 2–3, 2023	+25 basis points	5.0–5.25 percent

But the June Fed meeting pause comes at a time when inflation is at 4.0 percent and “core” inflation (inflation, less food and energy, which tend to be more volatile) printed Tuesday at 5.3 percent. The Fed highlights a target rate of 2 percent in so-called “headline” inflation—the overall number—currently 4.0 percent.

So, why pause rates? Well, there could be a few reasons.