Central Banks 'Set Up to Fail' on Inflation: Davies

The transcript discusses the debate over inflation targets, questioning the relevance of the 2% target in today's economic climate. It highlights the challenges of reducing inflation to 4%, considering interest rate hikes and energy price fluctuations. Concerns are raised about the central banks' ability to achieve these targets without political support, risking their independence. A suggestion is made to temporarily allow a higher inflation target during the adjustment phase.

What inflation target does Adam Posen suggest might be more appropriate than 4%?

• 3%

• 5%

• 1%

• 2%

What is one of the main challenges mentioned in reducing inflation to 4%?

• Lowering taxes

• Raising interest rates

• Increasing political support

• Decreasing energy prices

What does the speaker suggest might be necessary to achieve a 2% inflation target?

• Increasing government spending

• Making difficult decisions by the Fed

• Reducing interest rates

• Increasing energy prices

What risk does the speaker associate with the current central bank regime?

• Loss of public trust

• Increased inflation

• Economic growth

• Failure of central banks

What temporary measure does the speaker propose during the adjustment phase?

• No change in policy

• A higher inflation target

• A lower inflation target

• Immediate return to 2% target