Analyst Warns Fed Obsession with 2% Inflation is a Mistake

The Federal Reserve’s long-held inflation target of 2 percent should be thrown into the “academic ditches,” closely followed analyst Peter Boockvar warned on Monday.

The remarks by the chief market analyst for The Lindsey Group on CNBC came after a Wall Street Journal article said economists and central bankers are beginning to think the 2 percent inflation target is a mistake.

The Fed is considering alternatives, including even letting inflation rise above 2 percent, after an extensive period of low inflation and interest rates, the Journal reported.

“To say we need to raise the cost of living by 2 percent is somehow going to make a better economy remains outrageous and remains in the halls of academia and not real life,” Bookvar told “Squawk Box.” “It’s reducing the purchasing power by 2 percent.”

Boockvar said he’d rather have “price stability.”

“Ideally, that’s how you gain wages,” he said. “Earnings are only growing around 2 percent.”

During a conference in Madrid in March, Chicago Fed President Charles Evans said long-term inflation expectations may still be running below the Fed’s target, though in the short-term prices are rising toward the figure.

via CNBC

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