Inflation is too high when the public notices it

ON NOVEMBER 2ND the Federal Reserve raised interest rates by three-quarters of a point, bringing its benchmark rate to a range of 3.75-4.0%. The central bank reiterated its commitment to returning annual inflation—which is above 8% on the headline measure, and exceeds 6% on the index tracked by the Fed—to its 2% target. Getting there could require a painful recession. Yet although the Fed must treat the 2% target as sacred, it has surprisingly flimsy foundations—and could yet be changed.

A goal of 2% was first adopted in New Zealand in the early 1990s. Having decided to target inflation, policymakers had to pick some number. Gradually, the framework was aped by central banks around the world. The Fed has been formally shooting for 2% since 2012. Some economists argue that the target should be higher. As inflation rises so, over time, do interest rates. A higher starting point for interest rates would have been handy going into the global financial crisis of 2007-09, after which they plummeted to almost zero, all but exhausting central bankers’ ability to boost growth with monetary stimulus.