Tyler Cowen, Columnist

A 2% Inflation Rate Still Sounds About Right

Arguments for a higher target persist, but a steady rate of 4% simply isn’t sustainable politically.

June 26, 2023 at 11:00 AM UTC

Tyler Cowen is a Bloomberg Opinion columnist, a professor of economics at George Mason University and host of the Marginal Revolution blog.

Looking for lower prices.
Photographer: ELIJAH NOUVELAGE/AFP

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The notion that central banks should set an inflation target higher than 2% has longstanding support among many economists, including former chief IMF economist Olivier Blanchard, and has remained persistent even amid efforts to bring inflation down. As new data become available, however, the case for 2% — the US Federal Reserve’s current target — is looking stronger.

In the UK, core inflation rose to 7.1% in May. In the euro zone, core inflation has stayed at about 5%. The US is doing only slightly better with core inflation above 4.5%.