ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is a typical inflation target? Inflation levels of 1% to 2% per year are generally considered acceptable, while inflation rates greater than 3% to 4% can represent an overheating economy.

Detailed explanation-2: -The Federal Open Market Committee (FOMC) judges that inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Federal Reserve’s mandate for maximum employment and price stability.

Detailed explanation-3: -This is because price stability – which means low and stable inflation – contributes to sustainable economic growth. Targeting inflation of 2 to 3 per cent avoids the many costs to the economy from inflation that is too high or too low.

Detailed explanation-4: -The Government sets us a 2% inflation target To keep inflation low and stable, the Government sets us an inflation target of 2%. This helps everyone plan for the future. If inflation is too high or it moves around a lot, it’s hard for businesses to set the right prices and for people to plan their spending.

Detailed explanation-5: -The annual consumer price inflation in India accelerated to 6.52% in January of 2023, the highest in three months, compared to 5.72% in December, and above market forecasts of 5.9%. Inflation moved back to above the Reserve Bank of India target of 2-6%.