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Is 2% really the right inflation target for central banks?

27 Jul 2023 · 6 min read

informed Summary

  1. The article discusses the 2% inflation target pursued by central banks in the US and Europe, questioning whether it is the right approach for monetary policy.

Both the US Federal Reserve and the European Central Bank appear to be dead set on getting inflation back to their 2% target. But while 2% is viewed as a kind of “sweet spot” for inflation – neither so high that consumers struggle to cope, nor so low that it stifles economic dynamism – it is ultimately arbitrary, and its primacy in monetary policymaking is a relatively recent phenomenon.

In this Big Question, we ask Michael J. Boskin, John Cochrane, Brigitte Granville, and Kenneth Rogoff whether it is time to rethink the 2% target.

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