But to me the goal of ever growing wages and prices doesn't make much sense, especially with technology constantly disrupting things. How is this supposed to work?
So all your dollars are put on fire and lose 2% of their value annually. You can watch your cash burn to spite the Fed, or you can give it to someone else and make it their problem what to do with dollars while you enjoy whatever you bought.
Sure, in deflationary environment overall GDP growth would be much slower, but it will also be more sustainable in the long run, without big boom-bust cycles.
It's a wonderful situation for people who have jobs. It's just that in a deflationary trap, the number of people who have jobs tends to dwindle until prices start to level out/rise.
Also, to be clear, the inflation target is not 2% because the Fed just like prices going up, I've always been told they target 2% because it gives them a bit more wiggle room with interest rates (higher inflation means higher interest rates) in case of a recession.
There are a number of reasons usually cited for preferring small positive inflation, but that's not one of the ones I’ve usually seen. Deflation being seen as more harmful than i inflation leading to a bias away from it, and noninal wages being sticky so small positi5 inflation making it easier for their to be gradual decline in real wages in low-demand industries, and thus better demand-based pricing signalling for labor (the alternative being wages that don't adhust as smoothly but more rapid job losses when demand falls.)