Why Is the Fed So Fixated on the Inflation Rate?

The Federal Reserve has an inflation target of 2% per year. That target appears to be a minimum: They are concerned when inflation falls below their target but appear to be content with inflation above 2%. The current inflation rate from March 2016 to March 2017, measured by the Consumer Price Index, is 2.4%.

Prices provide information about the cost of bringing goods and services to market. Viewed in that way, a price increase should indicate that a good or service is more expensive to produce, and a price decrease should indicate it is less expensive to produce. Deviations from this function lower the informational value of prices and make economic calculation more difficult.