If you moved the goalpost in the middle of a game, the integrity of the game would be undermined. It is no different with regard to monetary policy. Congress has given the Federal Reserve the duty to conduct monetary policy consistent with stable prices and maximum employment.

The policy mandates may sound contradictory, but they are not. Over economic cycles, an economy with stable prices will achieve maximum employment. When households and businesses anticipate that inflation will remain low and stable, they will make appropriate decisions on saving, borrowing, investing, and consuming. When prices are stable both businesses and households can concentrate on what they do best, maximizing profits and maximizing the well-being of the household. When prices are stable the private sector does not have to worry about the value of its assets. Business does not build excess inventory in anticipation of inventory appreciation. Households can save with the knowledge that their savings are not losing value, daily or even hourly. Stable prices, then, are necessary for a well-functioning economy.

Today, inflation is elevated. It is sticky. Progress on reducing so-called core services inflation is proving difficult.

The most recent economic numbers indicate that the economy is strong and that the employment market is resilient. According to the Federal Reserve Bank of Atlanta, the economy is projected to grow at 2.8% in the current quarter. Importantly, the economy grew at an annual rate of 2.7% in the fourth quarter of 2022. In a non-inflationary environment, trend economic growth should average just under 2%. In addition, the employment market is resilient. Unemployment is at a 50-year low, and jobless claims are very low.

Under these circumstances, it is no surprise that wage inflation is elevated and price inflation is also disappointingly high. It is clear that the Federal Reserve is committed to its 2% inflation target. Some well-respected economists believe that the Federal Reserve should raise interest rates by 0.5% when it meets on March 22.

But monetary policy affects the economy with a lag. The worry is that as the Federal Reserve continues to raise interest rates, the economy will abruptly fall over the recession cliff. Progressive economists are worried that if a recession were to occur, the unemployment rate would rise and hard times would come to the private sector, both business and household. To forestall such a scenario, progressive economists want to raise the inflation target from the current 2% to 3% or higher.

This would be terrible policy.

In spite of relatively high inflation, consumer expectations of inflation over the long term are reasonably well anchored. Were the Federal Reserve to raise the inflation target, inflation expectations would become unhinged. It would be reasonable to anticipate that yields on Treasurys would rise rapidly to compensate for increased inflation risk. The credibility of the Federal Reserve would be damaged. Raising the inflation target would destabilize financial assets, raise interest rates, and guarantee a deep recession. The inflation genie would escape. The economic outlook would resemble the 1970s, with stagflation, high unemployment, and persistently elevated inflation.

Don’t move the inflation goalposts in the middle of an inflation fight.

James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes  a daily note on finance and the economy, politics, sociology, and criminal justice.