Targeting the Fed's Pesky Inflation Problem
[Financial Analysis and Commentary]</br></br>The Federal Reserve will debate this week whether it is time to scale back bond purchases. One argument against: Inflation is far too low.</br></br>Since January 2012, the Fed has set as its target a long-term inflation rate of 2%. And since then, inflation has fallen increasingly short of that.</br></br>As of July, the Commerce Department's price index for personal-consumption expenditures, excluding food and energy -- the Fed's preferred measure -- was running just 1.2% above its year-earlier level.</br></br>To get to 2% by the end of 2013, the index would have had to increase at a 3% annual rate in the final five months of the year. It hasn't held that sort of pace since the early 1990s.