Don Rissmiller is a Camp Kotok fishing pal, the new chair of the Global Interdependence Center, and a senior personality at Strategas. He is also one very thoughtful economist.

In his Weekly Economics Summary published last week, Don sets forth a serious analysis of inflation and the Fed’s 2% target. He outlines his arguments succinctly. And he ends with a series of questions about what the inflation target should be and whether there are options. Don captures the arguments that several members of the Fed’s FOMC have articulated. We expect this subject to be discussed this week. Clearly, the new Powell Federal Reserve will have to engage in this debate. We asked Don for permission to quote his piece extensively and share it with our readers, and we thank him for saying yes.

Don Rissmiller of Strategas follows:

“So, we continue to write about inflation, not because inflation is high (or likely to be high any time soon). Instead, we are moving from low levels to a little less low – and while there’s reason to believe that’s not a problem for the stock market (where nominal growth will boost revenue and earnings), there remain issues in the bond market.

“There’s also an opportunity for the Fed and other central banks to consider the recent past, and with the global economy now in pretty good shape (eg, U.S. real GDP 2.6% q/q annual rate in 4Q, and the tax cut coming), study if anything should be done differently. The topic of the inflation target is likely to continue to attract attention.

“Put bluntly, should the inflation target be precisely 2%? We have noted previously that the Fed’s goal of 2% inflation seems so familiar that it frequently goes without question that it is a ‘good’ target. But recent academic literature has continued to question whether that 2% number is correct. The 2% inflation target could be too low, and the push to achieve this ‘too-low’ target (over numerous decades) helps explain some of the unique issues in this business cycle.