Analysis: The Fed's "dual mandate" is outdated, and inflation may remain around 3.0%.

On September 19, Wall Street renowned analyst and president and chief investment strategist of Yardeni Research, Edward Yardeni, stated that the Fed first explicitly adopted a 2% inflation target in January 2012. Although the FOMC did not set a clear unemployment rate target, the current consensus, as shown in the Summary of Economic Projections (SEP), is that the 'long-term' unemployment rate is about 4.2%. The unemployment rate in August was 4.3%, while the PCE inflation rate in July was 2.6%. So, why did the FOMC vote this week to lower the benchmark federal funds rate by 0.25 percentage points? This is the first rate cut of the year, and in previous months, Fed officials had repeatedly stated that they were not in a hurry to cut rates. At the press conference, Fed Chairman Powell acknowledged that inflation 'remains somewhat elevated relative to our 2% long-term target.' However, he added that the FOMC is concerned about the significant slowdown in recent non-farm payrolls. Does this suggest future indications: that the Fed may not be able to bring inflation down to its 2% target in the coming years because it believes the labor market requires more attention? When the Fed failed to meet its inflation target from 2012 to 2021, it adopted an ultra-loose monetary policy. But even now, with inflation exceeding the target, the Fed may hesitate to tighten policy due to concerns about rising unemployment. If this is the case, inflation may remain around 3.0%. (Jin10)