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How the Fed got here. The path to the Fed's 2% inflation target was a winding one that began with an interview that is now infamous in central banking circles.
Federal Reserve Chair Jerome Powell said Tuesday that it will take "longer than expected" to achieve the confidence needed to get inflation down to the central bank’s 2% target, signaling that ...
The central bank’s inflation target of 2% in part defines what people think inflation will be, which in turn becomes the actual rate of inflation. But a theoretical self-fulfilling prophecy has ...
The typical numerical target of 2% has come under debate since the period of rapid inflation experienced following the monetary expansion during the COVID-19 pandemic. Mohamed El-Erian has suggested the Federal Reserve raise its inflation target to a (stable) 3% rate of inflation, saying "There's nothing scientific about 2%". [59]
The consistent easing of prices, which has stayed at or below the Bank of Canada's target of 2% since August, has helped the bank to slash its key policy rate by a total of 175 basis points from ...
For example, the Bank of England and the Bank of Canada have symmetrical inflation targets. Following the strategy review led by the new president Christine Lagarde and finalised in July 2021, also the European Central Bank adopted a symmetric inflation target of two per cent over the medium term and officially abandoned the asymmetric "below ...
Although since that time inflation-targeting has been adopted by "most advanced-world central banks", [91] in 1991 it was innovative and Canada was an early adopter when the then-Finance Minister Michael Wilson approved the Bank of Canada's first inflation-targeting in the 1991 federal budget. [91] The inflation target was set at 2 per cent. [87]
The central bank now expects inflation to average 7.2% in 2022, up from 5.3% forecast in April, easing to about 3% by the end of 2023, and then back to the 2% target by the end of 2024.