On Our Way to 2% Strategy The number one reason the Fed had been raising interest rates for nearly two years is INFLATION. Chairman Powell has stated repeatedly that his target for inflation is 2.0%. The year-over-year inflation rate is 3.2% but using the 6-month average, the level is 1.9%. Clearly, inflation is headed towards the Fed’s 2.0% target. This has resulted in the market pricing in six rates cuts next year in 25 basis point incr..