Inflation targets: why does 2% matter to central banks?

Most major central banks aim for about 2% inflation. When actual inflation runs above or below target, traders try to predict how the central bank will respond — which is half of what moves the market.

Questions for the thread:

• why is 2% the number, anyway?
• which central banks target something different?
• how do you use the target when reading an inflation release?

The inflation targets guide lists each bank's mandate.