Central bankers’ 2 per cent inflation target regime should now be retired
With the energy shock now a memory, central bankers require more flexible objectives
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WITH the end of the great inflation scare in sight, it’s time that the central bank hive mind contemplated what it might learn from the failure of its economic models.
The most obvious lesson: Steering multi-trillion-dollar economies to land with laser precision on a 2 per cent inflation pin needs to be abandoned.
Economic and geopolitical uncertainty necessitates a monetary system that can roll with the punches. A flexible inflation range that reflects reality should supersede an unhealthy fixation on one constant. Trying to fit all economic variables around one peg is futile.
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