{
  "title": "The Case for a Long-Run Inflation Target of Four Percent",
  "publication": "IMF Working Papers, June 9, 2014",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/index.md",
  "summary": "Many central banks target an inflation rate near two percent. This essay argues that policymakers would do better to target four percent inflation.",
  "sections": [
    {
      "heading": "Main argument",
      "content": "- Many central banks target an inflation rate near two percent.\n- The essay argues that policymakers would do better to target four percent inflation.\n- A four percent target would ease the constraints on monetary policy arising from the zero bound on interest rates, resulting in less severe economic downturns.\n- This benefit would come at minimal cost because four percent inflation \"does not harm an economy significantly.\""
    },
    {
      "heading": "Key findings and implications",
      "content": "- Raising the long-run inflation target from two percent to four percent reduces the likelihood and severity of hitting the zero lower bound on nominal interest rates.\n- Lower incidence of the zero bound implies monetary policy can respond more effectively in recessions, mitigating downturn severity.\n- The trade-off is characterized as favorable: the macroeconomic costs of four percent inflation are minimal relative to the stabilizing benefits."
    },
    {
      "heading": "Policy recommendation",
      "content": "- Policymakers should consider adopting a long-run inflation target of four percent to provide greater monetary policy space and reduce recession severity linked to the zero lower bound."
    },
    {
      "heading": "Metadata and classification",
      "content": "- Author: Laurence M. Ball\n- Date: June 9, 2014\n- Series: Working Paper No. 2014/092\n- Issue: 092\n- Volume: 2014\n- Pages: 21\n- DOI: https://doi.org/10.5089/9781498395601.001\n- ISBN: 9781498395601\n- ISSN: 1018-5941\n- Subject: Banking, Financial services, Inflation, Inflation targeting, Monetary policy, Prices, Real interest rates, Zero lower bound\n- Keywords: economist, Europe, federal funds rate, Global, Inflation, inflation expectation, inflation low, inflation process, inflation rate, inflation rise, Inflation Target, Inflation targeting, inflation uncertainty, lower-than-average inflation, Monetary Policy, nominal interest rate, Real interest rates, recession, single-digit inflation, WP, Zero lower bound\n\nSource: IMF Working Papers — \"The Case for a Long-Run Inflation Target of Four Percent\" by Laurence M. Ball (June 9, 2014).\n\n---\n\n Content in this bundle\n\n- wp1492\n  - wp1492 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1492 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/bundle-manifest.json)",
    "Authors: Laurence M. Ball",
    "Published: June 9, 2014",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498395601.001",
    "Many central banks target an inflation rate near two percent.",
    "The essay argues that policymakers would do better to target four percent inflation.",
    "A four percent target would ease the constraints on monetary policy arising from the zero bound on interest rates, resulting in less severe economic downturns.",
    "This benefit would come at minimal cost because four percent inflation \"does not harm an economy significantly.\"",
    "Raising the long-run inflation target from two percent to four percent reduces the likelihood and severity of hitting the zero lower bound on nominal interest rates.",
    "Lower incidence of the zero bound implies monetary policy can respond more effectively in recessions, mitigating downturn severity.",
    "The trade-off is characterized as favorable: the macroeconomic costs of four percent inflation are minimal relative to the stabilizing benefits.",
    "Policymakers should consider adopting a long-run inflation target of four percent to provide greater monetary policy space and reduce recession severity linked to the zero lower bound.",
    "Author: Laurence M. Ball",
    "Date: June 9, 2014",
    "Series: Working Paper No. 2014/092",
    "Issue: 092",
    "Volume: 2014",
    "Pages: 21",
    "DOI: https://doi.org/10.5089/9781498395601.001",
    "ISBN: 9781498395601",
    "ISSN: 1018-5941",
    "Subject: Banking, Financial services, Inflation, Inflation targeting, Monetary policy, Prices, Real interest rates, Zero lower bound",
    "Keywords: economist, Europe, federal funds rate, Global, Inflation, inflation expectation, inflation low, inflation process, inflation rate, inflation rise, Inflation Target, Inflation targeting, inflation uncertainty, lower-than-average inflation, Monetary Policy, nominal interest rate, Real interest rates, recession, single-digit inflation, WP, Zero lower bound",
    "**_wp1492**"
  ],
  "related": [
    {
      "title": "_wp1492",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1492.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1492.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1492.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-18T06:51:06.518Z"
}