Should central banks’ inflation targets be raised?
The last in our series on the central-bank pivot
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When new zealand’s parliament decided in December 1989 on a 2% inflation target for the country’s central bank, none of the lawmakers dissented, perhaps because they were keen to head home for the Christmas break. Rather than being the outcome of intense economic debate, the figure—which was the first formal target to be adopted by a central bank—owes its origin to an offhand remark by a former finance minister, who suggested that the soon-to-be-independent central bank should aim for either zero or 1% inflation. The central-bank chief and incumbent finance minister used that as a starting-point, before plumping for 0-2%. Over time, 2% became the standard across the rich world.
This article appeared in the Finance & economics section of the print edition under the headline “Aiming high”
Finance & economics July 23rd 2022
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- The Fed put morphs into a Fed call
- Should central banks’ inflation targets be raised?
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