I've always maintained that the challenge we face is that no one really knows where the tipping point between stable and unstable lies when it comes to CPI ... but the data suggests its somewhere between 4% and 6% ... by choosing 2% as a target the CB's have set an implied ceiling that would make their lives easier while being far enough from the deflationary limit ... but it has proven to be too close to the deflation event horizon (akin to flying at stall speed) ... so IMHO it now makes sense to me to set it closer to 3% ...
The quid pro quo is that CB's might get caught out a bit more often because there is less wiggle room in labour markets and global supply chains are more fragile than they were - and so the markets will require a term premium once again ... which means rates will need to be a bit higher than they were in the 2010's ... arguably the rate market has already adjusted for this particularly in Europe where we think policy is now excessively tight .... but we may have to wait for inflation to settle down abit before new regime becomes clear...