Over the coming few weeks, alongside the regular coverage of the Clark Center’s polls and other news, On Global Markets will be reporting on the discussions held at the Economic Experts Conference 9/10 October. Most of those sessions were held under the Chatham House Rule.
The 2010s feel like a long time ago. In economic terms and certainly when it comes to the nature of the academic and policymaking discussion around inflation, that decade almost feels like a different era. For most of the decade after the 2007 to 2009 global financial crisis, the pressing issue with inflation was that it appeared to be too low rather than too high, especially in Europe.
Central bankers mooted the benefits of adopting higher inflation targets and changing monetary policy frameworks to acknowledge previous undershoots. Now, after the inflationary shock of 2021-2023 and with fears of a rebound in price pressures still alive, the tone of the debate is very different.
At the Clark Center’s Economic Experts Conference, held on the 9th to 10th of October this year in Chicago, attendees took part in a useful session on inflation, taking in how the views of economists have shifted, the impact of tariffs, research on how the public perceives inflation, and questions about what will come next. So much was discussed that your columnist has felt obligated to devote two columns to covering it.
The session opened with an overview of the changing views amongst economists on the costs of inflation in the aftermath of the post-pandemic upswing across the rich world.
Back in 2017, the US Experts Panel was asked if changing the Fed’s inflation target from 2% to 4% would have essentially zero costs for households. This was, it should be remembered, during the time when inflation was perceived as too low and many policymakers feared that relatively low targets would result in monetary policy frequently hitting the zero-bound problem on interest rates.
Eight years ago, the panel was not convinced that such a switch would be cost-free for households. While 29% (weighted by confidence) of respondents believed such a move would have little cost for households, 51% disagreed.
Interestingly, the panel was asked a similar question earlier this year. This time around, though, the question related to the Fed moving to a 3%, rather than a 4%, target. Despite the lower increase in the proposed Fed inflation target, attitudes had somewhat hardened, with 43% disagreeing that such a move would be cost-free and 9% strongly disagreeing.
Panellists, it was noted, in 2025 gave various reasons for their disagreement. One factor, commonly cited, was that a higher inflation target would likely mean higher variance in inflation, and more variance tends to mean more uncertainty. Or, as one respondent noted at the time:
At 2% inflation, prices rise by a factor of 2.7 times in 50 years, 7.2 times in 100 years. At 3% inflation, prices rise by factors of 4.4 (50 years) and 19.2 (100 years). For young adults, the planning horizon may be 50-75 years, making these differences significant.
Various explanations were offered for this hardening in attitudes. It could, of course, be a case of recency bias – something from which economists are not immune – after the experience of the early 2020s. It may, though, relate to the different balances of unemployment versus inflation in the late 2010s compared to the mid-2020s, or it could be the case that the experience of the last few years has demonstrated new costs to inflation. It is certainly the case that the 2020s have clearly demonstrated – a topic to be covered in the next column – that the general public has a strong aversion to inflation and, when acting as voters, tends to punish incumbent governments when it occurs.
Perhaps more interesting, though, than the slight tightening in attitudes among US panellists, is the contrast with the views of the European Economic Experts Panel.
That panel was asked an almost identical question this year: would the European Central Bank moving its inflation target from 2% to 3% mean the long-run costs to households of inflation were essentially unchanged?
The results were strikingly different from those of the US Experts Panel. Weighted by confidence, 12% of respondents strongly agreed, 29% agreed, 19% were uncertain, 30% disagreed, and 11% disagreed. In other words, in sharp contrast to the US Panel, the European experts were deeply divided.
That may reflect, according to conference participants, the differing natures of Europe and America’s inflation shocks in the 2020s. While the US inflation spike was mostly driven by demand-side factors – expansionary fiscal policy and booming consumption amid a positive terms of trade shock – in Europe, inflation was mostly the result of a negative supply-shock coming from higher imported energy costs.
While US personal consumption expenditure has returned to its rising pre-COVID trend, European consumption has broadly stagnated for the last decade.
In other words, differing European and American views on rising inflation targets may reflect the differing states of the economic cycle and the appropriate setting of monetary policy rather than a fundamental divide on the costs of inflation in the longer run.
