Why is the inflation target 2%?
The sacred 2% inflation target turns out it's not the product of divine economic wisdom, but simply the result of the impromptu TV remarks made by Roger Douglas, the New Zealand finance minister in 1988.
Douglas, desperate to curb 10% inflation, pulled "0 to 1 percent" out of thin air, which his team later rounded up to 2% for "wiggle room."
Central bankers then proceeded to adopt this target like it was gospel, spreading it across the globe through their exclusive Basel club meetings. No rigorous science, no grand design.
The global financial elite built their monetary policy castle on the sand of a casual statement. And now, decades later, we are all stuck with this arbitrary figure, as if it is some immutable law of the universe.
TL;DR: Central Banks inflation target is basically a meme that got out of hand.
This article tells the story in more details: https://qz.com/2022696/where-did-the-feds-2-percent-inflation-target-come-from
The sacred 2% inflation target turns out it's not the product of divine economic wisdom, but simply the result of the impromptu TV remarks made by Roger Douglas, the New Zealand finance minister in 1988.
Douglas, desperate to curb 10% inflation, pulled "0 to 1 percent" out of thin air, which his team later rounded up to 2% for "wiggle room."
Central bankers then proceeded to adopt this target like it was gospel, spreading it across the globe through their exclusive Basel club meetings. No rigorous science, no grand design.
The global financial elite built their monetary policy castle on the sand of a casual statement. And now, decades later, we are all stuck with this arbitrary figure, as if it is some immutable law of the universe.
TL;DR: Central Banks inflation target is basically a meme that got out of hand.
This article tells the story in more details: https://qz.com/2022696/where-did-the-feds-2-percent-inflation-target-come-from