Strict inflation targets for central banks have caused economic harm

Financial Times/Edward Chancellor/7-25-2022

Ed Stein cartoon graphic of man about to step on bananna appeal unexpectedly and consequentially

“A great experiment in monetary policy is drawing to a close. Last week, the European Central Bank announced its largest rate hike in two decades, taking its benchmark rate back to just zero percent. Never before, over the course of some 5,000 years of lending, have interest rates sunk so low.”

USAGOLD note: Chancellor says specific targets lead to a suspension of critical judgment and policy errors. A central bank, for example, can adhere to an inflation target of 2%, all the while depositing printing press money with a non-targeted beneficiary like the stock and bond markets. The problem, as we are finding out, is that such cloak and dagger tactics have a way of manifesting themselves down the road as unintended and perhaps uncontrollable consequences.


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