Federal Reserve's 2% inflation target wavering? US Treasury Secretary Yellen: Adjusting to a target range could be discussed.

US Treasury Secretary Scott Bezent supports a reevaluation of the Federal Reserve's 2% inflation target once inflation rates sustainably fall back to 2%. Bezent stated in an interview, "Once we get back to a 2% inflation level - which I think we are close to achieving - we can have a discussion: is it wiser to establish a target range?" He said, "Once we re-anchor this target, we can discuss setting a range." Bezent suggested in the interview released on December 22nd that discussions may revolve around a range of 1.5% to 2.5% or 1% to 3%. He said, "It will be a very thorough discussion." The Federal Reserve officially adopted the current 2% inflation target in 2012, a target also adopted by many central banks globally. Bezent believes that "being precise to decimal points of certainty is ridiculous." But he mentioned that adjusting when inflation rates are above the target may give the impression of "whenever inflation gets above a certain level, you just bump it up." The interview was recorded after the release of the Consumer Price Index for November by the US Bureau of Labor Statistics on December 18th. The data showed a 2.7% year-on-year increase in the CPI. The Federal Reserve uses another indicator, the PCE Price Index, to measure inflation. The latest data shows a 2.8% increase in PCE for the 12 months ending in September. "People are 'suffering'" Bezent said, "It's hard to re-anchor unless you achieve the target and maintain credibility." He also acknowledged concerns about people's affordability - an anxiety that surfaced during the midterm elections in November, leading to losses for the Republican Party. The Treasury Secretary said, "We understand that the American people are 'suffering'." He stated that price levels "have become very high" and blamed this on the Biden administration. He believes inflation is now "starting to ease," partly due to a decline in rentals, arguing that the increase in rents was driven by a surge in undocumented immigrants. While some economists suggest that the recent CPI report may have statistical issues due to the government shutdown in October and early November, Bezent stated that he believes "this number is pretty accurate." He mentioned that while there were increases in some subcategories, including energy, real-time data indicates that these prices are declining. Bezent also hinted that stabilizing budget deficits could provide a reason to lower interest rates. He referenced the German example before the euro's inception, where the Bundesbank agreed to "cushion a landing" and lower rates in exchange for the government pursuing a non-spendthrift "reasonable fiscal balance." German model "This is something we can do here," he said. The central bank and government in Germany "worked hand in hand." He also noted that the Treasury Department "had a seat at the Fed's decision-making table" before World War II. "If we can stabilize budget deficits, or even reduce deficits, it will help to curb inflation," said Bezent. Bezent has been responsible for selecting a candidate to replace Federal Reserve Chairman Jerome Powell for President Donald Trump, reiterating criticisms of the Fed's excessive and prolonged balance sheet expansion after the COVID-19 pandemic. "Of course, large-scale asset purchases should be part of the so-called central bank toolbox," he said. He also supported the Fed using emergency powers to aid strategic industries when necessary, stating that if the airline industry were to collapse during the pandemic, "it would not be good for anyone." As for broader quantitative easing measures, "I believe (this policy) has lasted too long."