Flexible Average Inflation Targeting and Inflation Expectations: A Look at the Reaction by Professional Forecasters

Kristoph Naggert, Robert Rich and Joseph Tracy

Economic Commentary, 2021, vol. 2021, issue 09, 7

Abstract: This Commentary examines the response of longer-run inflation expectations to the FOMC’s August 2020 announced switch to a flexible average inflation-targeting (FAIT) regime. The data indicate an upward shift in the lower end (below 2 percent) of the distribution of inflation expectations and a stronger anchoring of expectations around the 2 percent inflation objective following the announcement, evidence that is consistent with intended effects of the change in the monetary policy framework. To provide context, we also include a retrospective assessment of the response of inflation expectations to the FOMC’s January 2012 announcement of an inflation objective. Lessons from the 2012 announcement suggest that conclusions about the adoption of the FAIT regime should be viewed as tentative. Consequently, we also describe indicators and features of the data to monitor developments going forward.

Keywords: inflation; forecasting (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.26509/frbc-ec-202109 Full Text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcec:90677

Ordering information: This journal article can be ordered from

DOI: 10.26509/frbc-ec-202109

Access Statistics for this article

More articles in Economic Commentary from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().