Fed sets 2% inflation target

[pmbug]

Ben S. Bernanke achieved one of his primary goals as Federal Reserve chairman yesterday by setting a numeric goal for inflation, advancing his legacy of greater transparency at the world’s most influential central bank.

The Federal Open Market Committee committed to holding inflation at 2 percent, concluding years of debate that Bernanke advanced after becoming Fed chief in 2006. ...
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The personal consumption expenditures price index -- the price measure officials chose for their inflation target -- is expected to be below the 2 percent goal at the end of this year. The FOMC’s central tendency estimate for the PCE index was 1.4 to 1.8 percent for this year, 1.4 percent to 2 percent next year, and 1.6 percent to 2 percent in 2014. The measure rose to 2.5 percent for the 12 months ending November.
...

http://www.bloomberg.com/news/2012-01-26/bernanke-moves-fed-toward-more-openness-with-2-inflation-goal.html

Their measuring stick is flawed (of course):

Well, we got an inflation target from the Fed. Basically, thinking at the Fed has been eliminated. The process has been automated. Bernanke has convinced the Fed board to adopt Core PCE as a determinate of monetary policy. So long as CPCE stays below 2%, Ben is going to have his foot planted on the monetary metal. It’s “full speed ahead” according to the Chairman. He's pushed things off until 2014 - a very long time from now.

My question: “Why is the Fed using CPCE versus another measure of inflation?” The very good news is that there is answer, and it comes from a very "reliable" source – The Federal Reserve. A detailed analysis on this topic was conveniently made public just a month ago.
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More: http://www.zerohedge.com/contributed/bernanke-goes-all

Jim Rickards says inflation targeting is a blank check for QE. It allows the Fed to enagage QE whenever they feel the need (when their CPCE model tells them so) without constraints on when it might end or the need to announce it explicitly to the market:

http://www.youtube.com/watch?v=LtNinfLrebI (embedding disabled)

[BamaJoe]

And in other news I've set a target of every half box I sort to have 50 silvers in it.

I think I have a better shot of reaching my target than the fed does.

[fb101]

And in other news I've set a target of every half box I sort to have 50 silvers in it.

I think I have a better shot of reaching my target than the fed does.

Ditto....................

[HPMBTT]

And in other news I've set a target of every half box I sort to have 50 silvers in it.

I think I have a better shot of reaching my target than the fed does.

Uh, maybe if you live in the New York area (based on posted threads/findings). Other than that, you have a slim chance of reaching that target.

[Engineer]

Does the fine print say 2% per quarter?

[Mossy]

Does the fine print say 2% per quarter?

Wow. They finally set a goal they can easily meet.

Like "In the first month".

[SilverEye]

I'll take a wild guess and say they miss. lol

When are we going to audit these guys?

[pmbug]

Sorry for the late follow up, but hope you find it worthwhile:

...
What we are left with is a trial-and-error monetary system that depends on the best judgment of 19 men and women who meet every six weeks around a big table at the Federal Reserve in Washington. At the end of a day and a half of discussions, 11 of them vote on what to do next. The error the members of the FOMC fear most when they vote is deflation. So they have built in a 2% margin of error.

Given the crudeness of the tools the FOMC uses to set monetary policy, allowing for such a margin of error is no doubt prudent. For example, when the economy slowed in the first half of last year, inflation picked up, accelerating to a 6.1% annual rate during the second quarter. And when the economic growth accelerated in the second half, inflation slowed. These results are the precise opposite of what the Fed's playbook says are supposed to happen.

The best the Fed can do -- an average debauch in the dollar's value of 2% a year while producing recurring financial crises and a more cyclical economy -- is demonstrably inferior to the results produced by the classical gold standard.

Here's just one example. The largest gold discovery of modern times set off the 1849 California gold rush and increased the supply of gold in the world faster than the increase in the output of goods and services. The price level in the U.S. did increase by 12.4 percent over the next eight years. That translates into an average of just 1.5% a year. The gold standard at its worst was better than the best the Fed now promises to do with the paper dollar.

The Fed's best is hardly good enough. The time has arrived for the American people to demand something far better -- a dollar as good as gold.

More: http://gata.org/node/10966

[Mossy]

Oh. That explains it. "2% per person". X 16, that's 32% per year.