The current monetary policy challenge could be defined as follows: if we accept, as central bankers do, that inflation – which now stands at around 1.0–1.5%, ie, slightly below the 2% target – is a major problem, the only possible way forward in their view would be to ease monetary policy until the target is met. But is this justified and reasonable?

Why should the 2% target be the absolute guide to monetary policy? Does this figure reflect the balance that should underlie the notion of