All posts tagged: LouisPhilippe

The damning truth about the UK’s 2% inflation target: it’s completely made up | Louis-Philippe Rochon

The damning truth about the UK’s 2% inflation target: it’s completely made up | Louis-Philippe Rochon

Across the world, central banks have been vowing for almost two years to return inflation to the target rate of 2%. In practice, this has meant increasing interest rates – the cost of borrowing – in order to slow down economic activity. Today, the Bank of England decided to leave interest rates in the UK at 5.25%, their highest level since 2008. There are almost 60 countries that officially have a 2% inflation target, including the US, UK, Japan and the eurozone, but where does this actually come from? It is perhaps the most important policy objective being pursued today; you would think there must be a slew of empirical support that justifies this chosen target. After all, the target matters a great deal. If it were, say 3% or 4%, we would probably no longer be so concerned with rising prices, as many countries’ inflation has fallen to those levels. I have spent hundreds of hours over the last few years poring over papers and documents at various central banks, going back decades, looking …