Getting inflation down from 3 to 2 might be a lot harder than getting it down from 10 to 3
Which raises the question: Why is 2 percent the target anyway? The history of 2 percent is actually quite strange, and there’s a pretty good case for a higher target.
Central bankers hate that idea — I’ve been in rooms full of men in gray suits when someone broaches the possibility of a higher inflation target, and the reactions aren’t pretty. But the main concern seems to involve the perception that the bankers would lose credibility; is that a good enough reason to impose high unemployment, if that turns out to be necessary to get inflation back to 2 percent?
Now, my own views on this have evolved a bit. One of the good aspects of the recent bout of inflation is that the public’s expectations of medium-term inflation have remained more or less “anchored” — there’s been no sign of a 1970s-type wage-price spiral.
I don’t think this reflects the Fed’s credibility, because I don’t think many people in the real world outside the financial markets have a clear idea of what the Fed even is, let alone its inflation target.
Paul Krugman 9 June 2023
Once volatile items such as food and energy are stripped out, however, “core” CPI rose another 0.4 per cent in May — matching April’s increase.
Compared to the same time last year, core prices are up 5.3 per cent.
FT 13 June 2023
US consumer prices rose at slowest rate since early 2021 in May | Financial Times (ft.com)
CPI still rising at about 5%
Peter Morici MarketWatch 30 May 2023
https://englundmacro.blogspot.com/2023/05/cpi-still-rising-at-about-5.html
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