by Dominique Dewitte
published on Friday, June 30, 2023 at 4:31 PM •
6 min reading
Economists are increasingly debating the value of the 2 percent inflation target in major Western economies. Major central banks have raised interest rates over the past year, but inflation remains stubbornly above their respective 2 percent targets. But how did you arrive at that goal?
Why is this important?
The European Central Bank, the Federal Reserve, the Bank of Japan, the Swedish Riksbank, the Bank of Canada, the Bank of England,… All aim for an inflation target of 2 percent. But the question is whether this objective, which stems from 1988, is still sufficient in an economy that has completely changed.
In the news. “We should not lightly brush aside an institution such as the 2 percent target,” writes economist Adam Tooze in the Financial Times. But, like any other quasi-constitutional rule, it must be subject to public scrutiny and judged in the light of the moment. The 2 percent target was a realistic target in an era of “great moderation.” we have to ask is: is it also suitable for the era of polycrisis?
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2023-06-30 14:34:03
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