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That 2% inflation target may not be sacred for much longer

Geopolitics, including the conflict in the Middle East, is complicating the calculations of interest rate-setters

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    • Will central banks raise interest rates enough to hit the 2 per cent target? Publicly admit that three (or even four) per cent is the new two?
    • Will central banks raise interest rates enough to hit the 2 per cent target? Publicly admit that three (or even four) per cent is the new two? Pixabay

    DeeperDive is a beta AI feature. Refer to full articles for the facts.

    Gillian Tett

    Published Fri, Oct 20, 2023 · 04:11 PM

    EARLIER this month, the doughty institution that is the United Nations Conference on Trade and Development (Unctad) issued its annual report. This included a novel twist: an appeal for Western central banks to rethink their mandates. 

    Yes, really. “Central bankers should relax their 2 per cent inflation target and assume a wider stabilising role,” the Geneva-based group declared, lamenting that “tighter monetary policy has so far contributed little to price easing (but delivered) a steep cost in terms of inequality and damaged investment prospects”.

    I doubt financial traders will pay any attention; to them Unctad is merely a stodgy bureaucracy. Nor will Jay Powell, chair of the Federal Reserve, or his counterparts in Europe and the UK. 

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