Ok, my question..why is 2% the magic number? I can understand why you wouldn’t want to go lower than 2...but why is 3% for a year a sign to tap the brakes? We seemed to have done reasonably well in the long past with higher rates of inflation.
Thanks. The interview format was quite helpful. Your rent post at INET complemented the interview nicely. Regarding questions... curious what you think of recent book regarding fed reserve role in expanding inequality gap. Karen Petrou is the author.
On the Core-Headline inflation, this is Bullard, President of the St Louis Fed 10 yrs ago, showing his "ignorance" on the topic of inflation targeting:
"In my remarks tonight I will argue that many of the old arguments in favor of a focus on core inflation have become rotten over the years. It is time to drop the emphasis on core inflation as a meaningful way to interpret the inflation process in the U.S. One immediate benefit of dropping the emphasis on core inflation would be to reconnect the Fed with households and businesses who know price changes when they see them. With trips to the gas station and the grocery store being some of the most frequent shopping experiences for many Americans, it is hardly helpful for Fed credibility to appear to exclude all those prices from consideration in the formation of monetary policy."
Ok, my question..why is 2% the magic number? I can understand why you wouldn’t want to go lower than 2...but why is 3% for a year a sign to tap the brakes? We seemed to have done reasonably well in the long past with higher rates of inflation.
Thanks. The interview format was quite helpful. Your rent post at INET complemented the interview nicely. Regarding questions... curious what you think of recent book regarding fed reserve role in expanding inequality gap. Karen Petrou is the author.
Claudia, I couldn´t resist to dable into the "Headline-Core" confusion!
https://marcusnunes.substack.com/p/on-headline-and-core-inflation
On the Core-Headline inflation, this is Bullard, President of the St Louis Fed 10 yrs ago, showing his "ignorance" on the topic of inflation targeting:
https://www.stlouisfed.org/~/media/Files/PDFs/Bullard/remarks/Measuring_Inflation_May_18_2011_FINAL.pdf
"In my remarks tonight I will argue that many of the old arguments in favor of a focus on core inflation have become rotten over the years. It is time to drop the emphasis on core inflation as a meaningful way to interpret the inflation process in the U.S. One immediate benefit of dropping the emphasis on core inflation would be to reconnect the Fed with households and businesses who know price changes when they see them. With trips to the gas station and the grocery store being some of the most frequent shopping experiences for many Americans, it is hardly helpful for Fed credibility to appear to exclude all those prices from consideration in the formation of monetary policy."
Thank you for taking the time to explain the basic definitions. This Q&A format is great!