The lower and upper bounds of the Federal Open Market Committee's long-run inflation objective
It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee's (FOMC's) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)-lower and upper bounds to the long-run inflation rate. He shows that the statements made by the FOMC in 2003 clarified the lower bound of its LIO and that the average of long-run inflation expectations responded by rising about 80 basis points. Moreover, consistent with reducing the market's uncertainty about the FOMC's LIO, long-run inflation expectations became more stable. The FOMC has recently been more specific about the upper bound of its LIO as well. The FOMC could eliminate the remaining uncertainty by establishing an explicit, numerical inflation objective.
Volume (Year): (2007)
Issue (Month): May ()
|Contact details of provider:|| Postal: |
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.stls.frb.org/research/order/pubform.html Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William Poole, 2006. "Inflation targeting," Speech 96, Federal Reserve Bank of St. Louis.
- Edward Nelson, 2005.
"Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 1(1), May.
- Nelson, Edward, 2005. "Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand," MPRA Paper 822, University Library of Munich, Germany.
- Edward Nelson, 2004. "Monetary policy neglect and the Great Inflation in Canada, Australia, and New Zealand," Working Papers 2004-008, Federal Reserve Bank of St. Louis.
- Ben S. Bernanke, 1993. "Credit in the macroeconomy," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 50-70.
- Edward Nelson & Kalin Nikolov, 2002.
"Monetary policy and stagflation in the UK,"
Bank of England working papers
155, Bank of England.
- Ben S. Bernanke, 2006. "Semiannual monetary policy report to the Congress: testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 16, 2006," Speech 168, Board of Governors of the Federal Reserve System (U.S.).
- William Poole, 2006. "Inflation targeting," Review, Federal Reserve Bank of St. Louis, issue May, pages 155-164.
- Edward Nelson, 2004.
"The Great Inflation of the seventies: what really happened?,"
2004-001, Federal Reserve Bank of St. Louis.
- Nelson Edward, 2005. "The Great Inflation of the Seventies: What Really Happened?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-50, July.
- Robert H. Rasche & Daniel L. Thornton, 2006. "Greenspan's unconventional view of the long-run inflation/output trade-off," Monetary Trends, Federal Reserve Bank of St. Louis, issue Jan.
- Brian Sack & Robert Elsasser, 2004. "Treasury inflation-indexed debt: a review of the U.S. experience," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 47-63.
- Brian Sack, 2000. "Deriving inflation expectations from nominal and inflation-indexed Treasury yields," Finance and Economics Discussion Series 2000-33, Board of Governors of the Federal Reserve System (U.S.).
- Ben S. Bernanke & Otmar Issing & Donald L. Kohn, 2004. "Panel discussion: inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 165-183.
- Alan Greenspan, 2005. "Chairman's remarks," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 137-138.
- Simon Kwan, 2005. "Inflation expectations: how the market speaks," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct7.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:2007:i:may:p:183-194:n:v.89no.3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.