As ever, much less fuzzy than me. Yes, mine accounts for the compounding, but yes more complicated to calculate and typically for a relatively little overall difference.
Your figure : 1.0016666^12 = 1.02018354089 .. subtract the 1 and 0.02018354089 = 2.018354089% annualised inflation rate (versus 2% intended figure) is near as a insignificant difference.
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