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Why the Fed Targets 2% Inflation, Not 0%

Macro and the Federal Reserve • Beginner Investing • 6 min

Zero inflation seems like the perfect goal. Stable prices mean your purchasing power stays intact. But the Fed actually aims for 2%, not 0%. They made this clear for the first time in January 2012 under Fed Chair Ben Bernanke. This was the first time in history the target was stated as a specific number instead of just being understood. There are real reasons behind this number. It’s not just a random figure.First,…

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