We need less inflation, not more

Radio NZ reports:

Nicola Willis is calling Labour’s willingness to discuss increasing the Reserve Bank’s inflation target “insane economic illiteracy”. Labour says that’s a “massive misrepresentation” of their stance.

Labour’s finance spokesperson Barbara Edmonds this morning said the party was “open to a discussion” about lifting the 2 percent midpoint of the RBNZ’s target to 2.5 percent.

I don’t support 2% or 2.5%. The original target was 0% to 2% with a midpoint of 1%. That was a good target as it was as close to no inflation as you can get, without risking negative inflation.

The difference between say 1% and 2.5% over time is quite huge. Say you shopping comes to $300. Over a decade the former sees you paying $331 and the latter $384. A 10.5% increase vs a 28% increase.