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Brian Goggin's avatar

Spot on. All good with me thanks 👍

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Sean's avatar

Really enjoyed the discussion lads. I agree the central bank approach to combating energy and food cost inflation is completely nonsensical. And it’s going to deliver a lot of pain for everyone.

Is the problem really the narrow mandate of central banks? They are already making up their economics as they go along. Surely we don’t want them making up their own objectives too!

Is the issue with how the inflation target is set? And how little thought went into it? Are the politicians guilty of setting an arbitrary limit on the most commonly used inflation index and assuming that’s all grand? Who came up with that idea?

CPI is supposed to capture the overall inflation in the economy whereas with a bit more thought we would probably be indifferent to inflation or deflation in certain components of that index. That’s noise that should be stripped out in my opinion to create some sort of sticky inflation index more suitable to be tracking.

If we want central bankers to ignore energy costs for example, why given them an inflation index to target that includes energy costs?

If we look back at the previous decade of zero interest rates, we saw globalisation and automation erode the cost base of many goods and services. That’s a good thing, no? So why did we need record low interest rates to cause inflationary pressures in other costs (like accommodation costs) just to offset those deflationary pressures and in aggregate hit this arbitrary target? I would imagine the ordinary Joe in his 20’s would have been quite happy living with the deflation in runners and flight costs without suffering the offsetting inflation in accommodation costs.

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