The problem with monetary hawks is that they are always looking for an excuse for tighter money. Doves have the opposite problem, a bias toward easier money. Recent events provide a good example.

I see lots of doves now talking as if getting inflation back to 2% should be viewed as the ideal. But that’s wrong; we have a “flexible average inflation target”. Inflation is supposed to average 2% over the long run, but not each and every year.

Back in 2022, doves correctly pointed out that it was appropriate to allow a period of above 2% inflation, as the economy was buffeted by negative supply shocks (Ukraine, Covid, etc.) But that same logic suggests that the current inflation rate should be well below 2%.

The US is currently experiencing a strong positive supply shock, driven most by sharply increased immigration but also the repair of damaged supply chains. If inflation is to average 2% over the long run, then inflationary periods of negative supply shocks such as 2022 must be offset by lower than average inflation during periods of positive supply shocks.

Under 4% NGDP targeting, we might currently be experiencing 2.5% RGDP growth and 1.5% inflation. Unfortunately, NGDP growth remains up around 6%, which is much too high.

To summarize, doves are correct that there are times when it is appropriate to allow above 2% inflation. But the logic of that argument is symmetrical—something many doves fail to understand.