The Four Percent Solution.

What are the chances that a significant minority in the U.S. Congress, feeling the pain their constituents are experiencing from higher interest rates and economic slowdown, some time in 2023 urges the Federal Reserve to raise its inflation target from 2 to 4 percent?

How would such a request be received by the Fed leadership? Welcomed relief? Or a message that time is running out and the Fed needs to be even more preemptive in its tightening?

EDWIN M. TRUMAN

Senior Fellow, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, former Assistant Secretary for International Affairs, U.S. Treasury, and former Director, International Finance, Federal Reserve Board

How likely: three.

The Fed leadership would have to listen to such a request and prepare a thoughtful response, but I suspect they would reject the idea for now. First, it is necessary to get the inflation rate into that range before moving the goalposts. Second, it is not wise to move the goalposts. Third, we are not likely to be in that range in 2023. Fourth, we will address in our upcoming review.

ALLEN SINAI

Chief Economist/Strategist and President, Decision Economics, Inc.

Price inflation in the United States, although it has peaked and is diminishing, likely will remain entrenched high over the next year or two, in a 4-6 percent range, then perhaps lower thereafter but far above the Federal Reserve's price stability target of 2 percent.

The Fed, almost messianic and religious in its zeal, is determined to achieve the 2 percent inflation target in order to all by itself reach "price stability." This is seemingly regardless of the potential recessionary effects of their actions and very likely rising unemployment.

But it is extremely difficult to see anywhere near achievement of that target within any reasonable time horizon.

Historically, once the "Inflation Genie Is Out of the Bottle" and the inflation dynamics of the inflationary process are well in train--regardless of the initial inflation impulses whether energy, demand-pull, supply-side, or from external shocks--sticky high and entrenched inflation is the result.

Rising interest rates alone, induced or central bankdriven, historically have not and cannot alone bring down inflation, especially the case in this episode, which is demand-side and supply-side, similar to the 1960s, 1970s, 1980s, and 2000s without financial disarray, credit crunches, potentially a financial crisis, and unacceptably high unemployment.

As this becomes increasingly evident, the odds are high, on a scale of one to ten perhaps eight, that the public and U.S. Congress will pressure the Fed to raise its price inflation target or at least modify its targeting approach.

Given its current policy stance and price stability objective, any potential hike in the inflation target likely will be rejected by the Fed.

As an institution, the U.S. central bank typically is slow to change, only doing so after extensive damage is done and the need to alter its approach becomes clear and obvious.

The coming future looks unlikely to differ from the past. The U.S. central bank thus should change its inflation target and approach preemptively.

There is nothing magical about what is a central bank myth, 2 percent inflation as "price stability." Under Chair Alan Greenspan, price stability was defined as not too much...