Considerations Regarding Inflation Ranges

Hess Chung, Brian Doyle (), James Hebden and Michael Siemer

No 2020-075, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We consider three ways that a monetary policy framework may employ a range for inflation outcomes: (1) ranges that acknowledge uncertainty about inflation outcomes (uncertainty ranges), (2) ranges that define the scope for intentional deviations of inflation from its target (operational ranges), and (3) ranges over which monetary policy will not react to inflation deviations (indifference ranges). After defining these three ranges, we highlight a number of costs and benefits associated with each. Our discussion of the indifference range is accompanied by simulations from the FRB/US model, illustrating the potential for long-term inflation expectations to drift within the range.

Keywords: Forward guidance; Monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 36 p.
Date: 2020-08-27
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-75

DOI: 10.17016/FEDS.2020.075

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