Central bankers will shift the inflation goalposts, writes peter_tl BVPredicts
Most developed-world central banks define price stability as a 2% annual increase: low enough for most people not to notice while leaving wiggle room before damaging deflation sets in. After the 2008 financial crisis, economists worried the targets were discouraging authorities from launching aggressive economic stimulus. In 2010 International Monetary Fund economistsToday, monetary authorities are facing price increases they have not experienced since the early 1980s.
These figures suggest it would make more sense for central banks to set a higher target range for inflation, allowing them to tolerate annual increases of 3% or 4%.of internet searches and social media from the Global Labour Organization suggests most people don’t worry about inflation until it gets close to 4%. A revised target would also allow central banks to accommodate longer-term inflationary pressures, such as trade frictions, shrinking working-age populations, and climate change.
inflation will still be above 2% in 2024. A prolonged period of missing the target also erodes credibility. Even if they avoid saying so, central bankers will soon need to start shifting the inflationary goalposts.The U.S. personal consumption expenditures price index rose 6.0% year-on-year in October, the smallest annual gain since December 2021, according to data released by the Bureau of Economic Analysis on Dec. 1.
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