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How Obamacare fooled the Federal Reserve

Author Michael Madowitz explains why the slowdown in health care inflation has made the Federal Reserve's 2 percent target harder to achieve.

After a series of back and forth fights in Congress, the Affordable Care Act—Obamacare to its best friends and worst enemies—is at its most popular point yet, but is its success behind persistent undershooting of inflation by the Federal Reserve?

Fed officials have broken with precedent and acknowledged the obvious—the 2% inflation target has lost some credibility. There are important questions around how we solve this problem—I joined a group of economists in calling for a higher inflation target—though this is not the only solution that would improve on current policy, as even members of the Federal Open Market Committee have acknowledged.

The above excerpt was originally published in MarketWatch. Click here to view the full article.

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Authors

Michael Madowitz

Economist