Low inflation: why it matters I’ve told you that inflation has been, is and will be too low relative to the FOMC’s target of 2 percent. But why should you care that inflation is too low? Isn’t it a good thing when goods and services aren’t as expensive to buy? There are two answers to this – very good – question.
The first answer is that borrowers and lenders in our economy count on the Federal Reserve to deliver the inflation rate it targeted. If inflation is higher than the target, lenders are harmed because they receive payments that are smaller than they expected in real terms. Put another way, they can buy fewer goods and services with their payments than they expected.