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Dolar: Why doesn’t the Federal Reserve target another number?

December 21, 2022

What’s so special about the number 2? Quite a lot, if you’re a central banker – and that number is followed by a percent sign. That’s been the de facto or official target inflation rate for the Federal Reserve, the European Central Bank and many other similar institutions since at least the 1990s. But in recent months, inflation in the U.S. and elsewhere has soared, forcing the Fed and its counterparts to jack up interest rates to bring it down to near their target level. As an economist who has studied the movements of key economic indicators like inflation, I know that low and stable inflation is essential for a well-functioning economy. But why does the target have to be 2%? Why not 3%? Or even zero?

Article Source: The Daily Record

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