There is a large disconnect between the inflation preferences of consumers and those of the central bank. The general population would like to see lower inflation - much lower than the 2% target, so it is no surprise that current inflation rate is not making consumers happy. Consumers have a preference for inflation at .2% which is lower than the magic 2% of central bankers. See the paper "Inflation Preferences".
Consumers focus on the fact that inflation reduces real wages and that it also reduces the purchasing power of their money balances. Both as good strong economic arguments. So if consumers have a strong preferences for lower inflation, why does the Fed persist with its view that 2% is the necessary target especially when consumers are not making judgments that are irrational?
So, what should the Fed do given this strong consumer preferences for lower inflation? The authors realize that the Fed has two choices: one, adapt to the preferences of consumers and bring down the inflation target, or two, influence consumer preferences by educating them on the benefits of having higher inflation.
This is a weird paper that seems to advocate that the Fed just needs to inform consumers that their life would be better if they suffered an erosion of their real wages and purchasing power because it would make the Fed job easier to reach their dual mandate of controlled inflation and full employment. Consumers just need to be educated on why the consistent pain in losing purchasing power is better than higher unemployment. I want to see Chairman Powell talk to the America people and tell them it is necessary for them to accept the Fed preferences over their own view and experience.
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