George Osborne puts his personal weight behind the target, by reaffirming it in every budget. He has shown himself especially alert to the danger of dragging the economy down by obsessing about an overshoot, refining the mandate to empower Threadneedle Street “to use unconventional monetary instruments to support the economy”. How odd it was, then, to have the same chancellor welcome last week’s slide in inflation to so far below where he thinks it should be as “a milestone for the British economy”.
At one level, of course, Mr Osborne – whose sudden enthusiasm for disappearing inflation was loyally echoed by his Lib Dem deputy, Danny Alexander, as well as by Nick Clegg – is simply trying to say popular things before an election. Inflation is down because petrol has got cheaper, and most voters will be cheerful about that, so there is no political merit in souring the good news. And indeed, it could even be that the economic effects of ultra-low inflation will prove benign, if it is indeed cheap oil that is the sole cause.
If that is the analysis, though, then it really is time to retire the target, and move to another that is in line with the real objectives. For when chancellors cheer at their own targets being missed, then, instead of strategic economic direction, we are left with aiming in the dark.
HT Giles Wilkes