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
3% is notable because it’s 1% above the 2% target. (Sort of like how going 65 mph is only bad because it’s 5 mph above the 60 mph limit.)
Someone wrote a paper declaring 2% as the magic number by circa 1995, and for some reason it caught on and now everyone acts like it’s based on some immutable law of economics.
Source: an economics YouTube channel
There is an excellent planet money (an NPR podcast) episode about this which I highly recommend. The gist of it is no, 2% isn’t magical. We just made it up. There are economists that are now arguing for 3%. You can find the podcast [here](https://www.npr.org/2023/01/13/1149071772/two-percent-target-inflation-expectations).
Let’s not forget that part of it is government wants inflation so that their debt means less
2% is considered by a lot of economists to be enough that people keep investing, but not so high that prices spiral out of control. Any lower than that and people end up holding on to their cash, rather than investing in companies, banks, etc. There isn’t an equation that says 2% is perfect or optimal.
The 2% target is [completely arbitrary](https://mises.org/power-market/origins-2-percent-inflation-target). Low enough that people will have confidence you won’t go crazy printing money, but high enough to give you flexibility to have some fun printing.
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