The Federal Reserve has raised interest rates six times this year in its effort to lower inflation—currently at 7.7%—to what it considers to be the ideal level of 2%. But how did the central bankers decide that 2% is ideal rather than some other number?
It’s a question several Fed critics have raised. On Friday, Bank of America was the latest to weigh in on the matter, saying bluntly, “there is nothing special about 2%.”
The Fed has company in its 2% inflation target. Several countries have the same target, seemingly giving more confirmation that 2% is perfect.
Bank of America, however, has a different take, saying that the Fed could be reluctant to adjust its 2% target to some other number because it would undermine its credibility.
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