Gillian Tett: That 2% inflation target may not be sacred for much longer
“Central bankers should relax their 2 per cent inflation target and assume a wider stabilising role,”
I doubt financial traders will pay any attention; to them Unctad is merely a stodgy bureaucracy.
I have repeatedly heard muttered by public and private sector voices: is there any point in retaining that two per cent target in a world where inflation seems likely to remain above this level for the foreseeable future — even if it is “only” around four?
Or as one Fed regional president told me this summer, after touring local companies: “Everyone keeps asking if three [per cent] is the new two.”
problem for central bankers is that prices are no longer being shaped “just” by demand cycles, of the sort they have spent decades analysing and trying to control
models using the so-called Taylor rule suggest that US rates would need to rise
Banks... Non-financial companies would suffer too, given that almost $2tn corporate debt must be refinanced in the next two years.
And while that only represents 16 per cent of the total, it is enough to matter.
Gillian Tett Financial Times 19 October 2023
https://www.ft.com/content/38ce1a9c-89cc-4157-992a-f0d4cdd95440
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