Is there some sort of mathematical reason behind this goal? Does 3% have some sort of long-term effects such that it becomes uncontrollable or something?
It seems like, inflation or not, places are just as busy (restaurants, Target/Wal-Mart, Costco, etc…).
In: Economics
Inflation anchor has been an on going debate among us economists, why is it precisely 2%, why not 1.8% or 2.15%? In short there is really no real mathematical reason behind the number of 2%, you can think of it as an arbitrary number that have worked in the US, and much of the developed economies, so we just sticking with it at this point, perhaps 3% will work just as well or even better. There are some emprical studies on inflation target, but they usually don’t pinpoint it at exactly 2%.
You actually raised a good point, and matter fact there are many economists who argue for higher inflation anchor, and there are certainly some merits to their arguments, such as more room before hitting the zero bound, permanent changes in supply demand dynamic, etc…
FYI, I read from somewhere that the origin of 2% target is from either New Zealand or Australia, and it was just an arbitrary number they picked.
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