Three senior officials from the Federal Reserve convey a significant signal: support for shifting the inflation target from 2% to a range-based system

Three Federal Reserve officials have successively expressed support for adopting an inflation target range instead of the current fixed target of 2%, suggesting that the central bank's policy framework may face adjustments.

This week, Federal Reserve Governor Michelle Bowman, along with Atlanta Fed President Raphael Bostic, spoke on different occasions, all agreeing that there are advantages to replacing the precise 2% target with an inflation target range.

In the five-year policy framework review completed by the Federal Reserve last August, adjustments to the inflation target were excluded, but the latest remarks from officials indicate that there is still internal discussion on this matter.

These discussions emerge against a subtle political backdrop. President Trump has been continuously pressuring the Federal Reserve this year to lower interest rates.

As Chairman Powell's term is set to end in May next year, Trump will have the opportunity to appoint a new candidate, raising market speculation about potential structural changes at the Federal Reserve under new leadership.

Trump's Allies Speak First

This week, the three officials articulated the rationale for an inflation target range from different perspectives.

On Monday, Trump's ally, Governor Michelle Bowman, who joined the Federal Reserve on September 16, stated at the New York Economic Club:

An overly precise inflation target may lead to excessive micromanagement.

She pointed out that "measuring inflation is extremely difficult" and believes that returning to the practice of pursuing "low and stable prices" without setting specific numbers, as was done before 2012, is also "an interesting approach."

However, Bowman emphasized that before making any changes, officials must first bring inflation back to 2%.

Powell's Potential Successor Echoes

On Tuesday, Governor Michelle Bowman, appointed by Trump and seen as one of the potential successors to Powell, also expressed a similar viewpoint. At the Kentucky Bankers Association annual meeting, she stated:

Other countries have already adopted target ranges.

She believes:

This approach can prevent us from being overly anxious about precise inflation levels.

Bowman downplayed the likelihood of an immediate policy shift but added that "it is always important to engage in dialogue."

Regional Fed President Proposes Specific Range

On the same day, Atlanta Fed President Raphael Bostic mentioned in a podcast that the public sometimes misunderstands the precision the Federal Reserve can achieve when anchoring inflation targets. He stated:

Regarding the inflation target, I am actually open to using a range.

When asked about the ideal range, Bostic believed it should be narrow enough to prevent the accumulation of upward inflation momentum, citing:

Possibly between 2.25% and 1.75%.

Policy Background and Market Impact

The discussion of establishing an inflation range is deeply rooted in the long-term dilemma the Federal Reserve faces in achieving the 2% target.

Data shows that due to economic disruptions caused by the COVID-19 pandemic and recent tariffs imposed by the Trump administration on global trading partners, the U.S. inflation rate has remained above the 2% target for the past four and a half years However, before 2020, the Federal Reserve was long troubled by the opposite issue—inflation consistently below target levels.

At that time, this trend raised concerns among policymakers, who believed that low inflation would hinder their ability to raise interest rates to more normal levels.

This historical "bidirectional deviation" from the target highlights the difficulty of precisely controlling inflation and provides a realistic basis for adopting a more flexible inflation target range