Why Aim for 2% Inflation?

Source: Independent Institute
by Randall G Holcombe

“The Federal Reserve has set a 2% target for inflation, which, if hit, would result in prices doubling in about 36 years. Is this the ‘best’ inflation rate in some sense? In fact, prices have nearly tripled in the past 36 years. The CPI has risen from 112.7 to 303.4 since 1987. Based on the consistent overshooting of the Fed’s target alone, one might argue for a target rate of 0%, making it more likely that the actual inflation rate would come in around 2%.” (05/12/23)