I don't think anyone in Turkey or Argentina would call that stability... I take your point about not causing a recession for some number chosen by New Zealand central bankers (I think). It's just that we all need an anchor even if the anchor slips a little from time to time.
But hold on, their inflation is not stable at all. It jumps all over the place. I'm talking of a theoretical steady state with a constant rate of inflation of 1.5% every month, compounding to a beautifully steady and predictable 20% every year. That's the fun of the thought experiment.
On the serious note, I do agree with you -- as I wrote, I think the Fed is taking a big risk now that everyone is still scarred by higher inflation. And I do think at 3% the risk of more volatile inflation is larger than at 2% -- so I suspect if on the FOMC you and I might have dissented on the other side, against any cut. But the Fed's likely (in my imagination) counterargument deserves a fair hearing.
I don't think anyone in Turkey or Argentina would call that stability... I take your point about not causing a recession for some number chosen by New Zealand central bankers (I think). It's just that we all need an anchor even if the anchor slips a little from time to time.
But hold on, their inflation is not stable at all. It jumps all over the place. I'm talking of a theoretical steady state with a constant rate of inflation of 1.5% every month, compounding to a beautifully steady and predictable 20% every year. That's the fun of the thought experiment.
On the serious note, I do agree with you -- as I wrote, I think the Fed is taking a big risk now that everyone is still scarred by higher inflation. And I do think at 3% the risk of more volatile inflation is larger than at 2% -- so I suspect if on the FOMC you and I might have dissented on the other side, against any cut. But the Fed's likely (in my imagination) counterargument deserves a fair hearing.
Et tu, Marco? Sure, 3% is close to 2%. It's also close to 4%, which is just a step away from 5%...
Very true!
And that's exactly why the Fed will not say they now aim for 3% -- plausible deniability at work here...
But here's the question: would a perfectly steady and predictable 20% annual inflation still qualify as "price stability"?