2P or not 2P


Jerome Powell “It’s possible that this time is really different,”

the Fed chief told reporters last week after raising rates for a tenth straight time. 


On a monthly basis, core prices rose 0.4%, equivalent to 5% at an annual rate  

In such a situation, it can take a deep recession to get inflation down. 

Greg Ip WSJ 10 May 2023


How much pain should we be willing to suffer to squeeze inflation down to that point? 

A number of economists, myself included, have long argued that the 2 percent target is too low. This isn’t a radical position; many of the advocates of a 3 or even 4 percent target are as mainstream as they get. Recently, Olivier Blanchard, the former chief economist of the International Fund...

But what if inflation stabilizes at a higher rate—say between 4% and 6%? 

In this plausible case, central banks may be compelled to start needlessly raising rates again, catching investors off guard. It would make a lot more sense to raise the inflation target instead, or define it as a wider range.

 WSJ 4 December 2022

Englund: Why getting inflation down to 3 percent is probably enough (englundmacro.blogspot.com)


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