Column-The wiggle room around 2% inflation targets :Mike Dolan
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The recent interest rate cuts by the European Central Bank and the Bank of Canada indicate that hitting 2% inflation targets precisely is not a precondition for central bank moves. The central banks cut interest rates despite headline inflation rates still being above 2.0% targets. Many policymakers and economists doubt the wisdom of exact point targeting and argue that getting inflation to within one-tenth of one percentage point of a fairly arbitrary goal may not be worth the potential damage to the economy. Central banks also have a degree of latitude around their targets, and their formal targets are not always as rigid as they seem. The Bank of Canada, for example, has a 2% target as a mid-point of a 1%-3% "inflation-control range." The European Central Bank has adopted a more symmetric target around 2% "over the medium term." The Federal Reserve has shifted towards long-term averaging of inflation in assessing its target. The bias from here will likely be more restrictive policy on average in the years ahead, but some cuts may still be necessary. The opinions expressed in the article are those of the author, Mike Dolan.

#Inflation #CentralBanks #InterestRates #EconomicPolicy

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