Mr. Blinder is correct to call out the absurdity surrounding the notion that policy makers are “failing” in their inflation objective of 2% with the latest inflation reading of 1.7%. Yet Mr. Blinder’s criticism does not go far enough. The Fed’s inflation target is based on a price gauge in which only 70% of the index is based on prices that consumers actually experience; the remainder involves business prices or nonmarket prices. Conceptually correct and statistically accurate price measurement is fundamental to monetary-policy decisions, yet policy makers pin their rate decisions on a price index that only they use. Perhaps the real problem with the inflation objective is the gauge, and not the target itself.
Joseph Carson
Westport, Conn.
Mr. Carson is a former AllianceBernstein chief economist.