Optimal Inflation Level. All central banks following an inflation-targeting regimen aim to keep the inflation at a positive rate. For example, the European Central Bank (ECB) has a target of below,...

Optimal Inflation Level. All central banks following an inflation-targeting regimen aim to keep the inflation at a positive rate. For example, the European Central Bank (ECB) has a target of below, but close to, 2 percent inflation and the Bank of England has a target of close to 2 percent inflation. Explain why central banks don’t target zero percent inflation.