Inflation's Persistence Creates Dilemma for Federal Reserve

Americans’ intense dislike for inflation poses a significant challenge for the Federal Reserve. Despite improvements, inflation remains above the Fed’s 2% target, with April’s rate at 2.7%. This situation complicates the Fed’s decision-making, as policymakers are expected to keep interest rates steady at their highest level in over two decades. Pre-pandemic, some economists argued for a higher inflation target to avoid the “zero lower bound” problem, where the Fed’s ability to cut rates in a recession is limited, leading to prolonged economic recovery and joblessness.

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