Would an inflation target help anchor U.S. inflation expectations?

Eric T. Swanson ()

FRBSF Economic Letter, 2006, issue Aug 11

Abstract: Since the October 2005 nomination of Ben Bernanke to become Chairman of the Federal Reserve Board, there has been increasing speculation in the financial press that the Federal Open Market Committee (FOMC) might soon adopt an explicit numerical objective for inflation. However, skeptics of inflation targeting have maintained that this would constrain the FOMC and might provide little benefit in return—after all, it has been argued, haven't inflation expectations in the U.S. been well anchored since the early to mid-1990s? ; In this Economic Letter, I discuss recent research on whether inflation expectations in the U.S. have been well anchored over this period and whether an explicit numerical objective for inflation might help to "focus and anchor" those expectations. These are important questions which we have only recently begun to be able to answer using high-frequency financial market data from a variety of countries.

Keywords: Inflation; (Finance) (search for similar items in EconPapers)
Date: 2006
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