Important
Inflation should be around 2%.
But why?
The answer to that question is: a bunch of smart people said 2% is good.
It’s not a hard rule but rather a guideline for central banks to issue monetary policy.
From historic analysis an inflation rate of about 2% balances
- inflation and economic growth
- unemployment
- deflation security pretty well.
2% is a also a global consensus, signaling to other countries or central banks that you know your stuff.
What the ECB says
An inflation rate of 2% ensures price stability and supports the ECB’s goals by preventing deflation risks and maintaining effective monetary policy. It allows for smoother economic adjustments, prevents excessive unemployment, and addresses potential biases in price measurement.
& https://www.ecb.europa.eu/stats/macroeconomic_and_sectoral/hicp/html/index.en.html#why