The Federal Reserve sets monetary policy with two goals in mind: to maximize employment and stabilize prices. The central bank ensures the latter by targeting inflation at 2%.

The central bank has utilized its tools and adjusted interest rates to meet those inflation expectations for years, but the Fed did not officially adopt a target rate until 2012.

Economist David Wilcox with the Peterson Institute and Bloomberg Economics said inflation targeting creates more certainty about where prices are headed for the Fed and consumers.

He adds, building credibility is critical when inflation takes off because “financial market participants, households, businesses all have confidence that you're going to bring inflation back down to target.”

But stubborn inflation coming out of the pandemic has led to political pushback from critics who say the target number should be reconsidered.

Yahoo Finance’s Washington Correspondent Ben Werschkul says there’s criticism that asserts there’s too much emphasis on the inflation target, while a target for the labor market is not considered.

Yahoo Finance unpacks the origins of inflation targeting and why 2% became the bullseye.