"Whether inflation stays at 3%-4%." That is the question Chicago Fed President Austan Goolsbee posed this week [2], a formulation that does two things: it treats a range 50% to 100% above the Federal Reserve's stated 2% target as a plausible equilibrium, and it shifts the burden of proof from "how do we get back to target" to "how do we keep it from getting worse."
The Fed's target is 2%. The question Goolsbee is asking is whether inflation "stays" at 3%-4%. The gap between those two numbers is the story.
Goolsbee stated that inflation is "well above the target and has been going the wrong way" [1]. Not a blip. Not transitory. Not a one-month print. A direction.
The Dallas Fed's Trimmed Mean PCE measure is designed to filter volatility. It excludes the most extreme price changes, the outliers that move on supply shocks, weather, geopolitics. If that metric is moving the wrong way, the problem is not eggs or energy. It is the middle of the distribution. The stuff you cannot blame on external shocks.
Goolsbee also said the labor market is stable [1]. Translation: no recession-driven disinflation is coming. No external shock to do the Fed's work for it. The question of whether inflation stays at 3%-4% is not hypothetical if nothing in the current structure is pushing it lower.
3.2%
Canada's CPI accelerated to 3.2% [1]. Same pattern as the U.S.: inflation stuck above target, labor market holding, central bank unable to close the gap. Two central banks, same problem, same year.
Either both made the same mistake, or the 2% target does not fit the post-2020 economic structure.
The Federal Reserve has spent two years saying it will return inflation to 2%. The question Goolsbee is now asking is whether it stays at 3%-4% [2]. The difference between those two numbers is $1.2 trillion in purchasing power over a decade for a median household. No one has explained when the target changed, or who approved it.
The Fed's credibility rests on the assumption that the target has not changed, that 2% remains the goal, not a suggestion. But when a sitting Fed president frames the question as whether inflation "stays" at double the target, the market hears what is not being said: the institution may no longer believe it can deliver what it promised.
