Larry Summers thinks it’s a bad idea for central banks to adjust their inflation targets, and I’d have to agree — albeit with some important caveats.

If inflation moderates to some reasonable level that’s both tolerable for everyday people and low enough that real wage growth is meaningfully positive, then pursuing an arbitrary target for the sheer sake of it would be asinine almost by definition.

That’s particularly true if it becomes apparent that inflation in developed economies simply isn’t going to recede to 2% over any realistic time frame and/or if it’s obvious that achieving 2% intermittently is only possible via engineered recessions.

That said, Summers is emphatically correct that central banks shouldn’t adjust their targets right now, just a year into the inflation fight, and without knowing whether price growth might actually recede to something close enough to 2% to suggest the target is still viable. That’s the sort of thing that could undermine public confidence further at a time when central bank credibility is in doubt.

“It would be a grave error for central banks to revise their inflation target upwards at this point. Having failed to attain the 2% target and having re-emphasized repeatedly the commitment to 2%, to then abandon the target would do very substantial damage to credibility,” Summers said, during a panel discussion in Davos. “If you can adjust once, you can adjust again.”

That’s all true, but, again, common sense does have a part to play at some juncture. You can’t just pretend, in perpetuity, that 2% inflation is achievable without ever achieving it. If you really want to “do very substantial damage to credibility” (as Summers put it) that’s a good way to go about it — claiming you’re going to get something done and then never doing it.

Unless inflation recedes quickly back to 2% (which, during the same panel discussion, the SNB’s Thomas Jordan correctly assessed is unlikely), this debate will become paramount over the next several years.

“[The] annualized three-month change in US CPI is 0%  i.e. there has been zero inflation in the US over the past three months [and] markets are super-bullishly trading two final 25bps hikes, then 200bps of cuts over the following 18 months,” BofA’s Michael Hartnett noted, in the latest edition of his popular weekly “Flow Show” series.

Hartnett called the idea of a Q1 trough in CPI a “heretical” thought. The irony, he suggested, is that such an outcome, if it prompted a premature “Mission Accomplished” declaration from central banks, could “confirm a new era of inflation.”

How? Well, it’s simple really. “[The] expected end of tightening occurring before policy rates [are in] restrictive levels in real terms and hikes ending with economies at full employment” may be tantamount to “central banks quietly accepting higher structural inflation,” Hartnett wrote.

Of course, they (central banks) would never admit to such a thing. Hartnett allowed that any tacit acceptance of higher inflation might be “unwitting.” But, he said, it could also be purposeful or at least cognizant. “Maybe they think low rates help to service government debt,” he went on to write. Or maybe, he mused, central banks like the idea of higher inflation “debas[ing] the nominal level of debt” and helping to address wealth inequality.

Either way, the “investment conclusion” would be that the “super-trend” of favoring “inflation assets” over “deflation assets” is still “in its infancy.”