Average-Inflation Targeting, In a Nutshell
Let the bow-tie set argue about the niceties and the nuances. Here is what I can tell you about inflation targeting so that we can all understand the debate: suppose they changed the rules of baseball in an analogous way.
A new pitcher comes in to the game. He throws a pitch over the batter’s head. His next pitch skips behind the batter. His third pitch sails 2 feet high and outside. His fourth pitch almost hits the mascot.
“Yer out!” barks the umpire. Because the four pitches averaged out to strikes. My questions:
- I don’t know that the new rule gives me any greater confidence in the pitcher.
- It isn’t clear to me how that rule would help the batter.
- Maybe this helps a bad pitcher. But I wonder why a good pitcher would need that rule.
That is all.
Categories: Analogy, Federal Reserve
average inflation, inflation targeting
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