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Even to replace the 2% "target/ceiling" with a 2% 5 year moving average would be a major advance, as it would force more reflationary policy after consistently undershooting the target for some years.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu May 29th, 2014 at 04:02:36 PM EST
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No, that would be a bad idea, as it would force meritless contractionary policy after overshooting.

Last year's inflation is water under the bridge.

Now, if your inflation rate systematically undershoots during slumps, and systematically overshoots during booms, then it would indicate that you need more fiscal policy in your policy mix - because fiscal policy works directly on the real economy, while interest rate policy works only at one remove, if at all.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 30th, 2014 at 05:53:14 AM EST
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