‘Mission Unaccomplished’
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
Based on the last three months, seems like inflation is back or almost back to the FOMC’s preferred target. According to Hartnett, annualized three-month change in US CPI is 0%, while the annualized three-month rate for core PPI is 2.16%. Not saying we couldn’t see an upside surprise in either of these numbers over the next quarter or so, but still, seems like the Fed is well on the way to achieving its inflation goals.
I am worried about the consequences of winning the inflation war too quickly. Nominal growth rates are in peril in the near future. Then maybe Larry will go away.
To wit, from Wednesday’s Wall Street Journal.
https://www.wsj.com/articles/rising-interest-rates-hit-landlords-who-cant-afford-hedging-costs-11673900169?st=a8ubbp91dw0x4y0&reflink=desktopwebshare_permalink
I wonder if Larry or even most Fed governors are even aware of this hedging requirement. Probably not since it is not an input into their models.