Average Inflation Targeting in the Financial Crisis Recovery

RePEc Short ID: pcr38
ORCID iD: 0000-0003-3359-1823

Curdia, Vasco

Journal Article

Average Inflation Targeting in the Financial Crisis Recovery

Abstract: The Federal Reserve adopted average inflation targeting as part of its long-run monetary strategy framework in 2020. This strategy allows inflation to rise and fall such that it averages 2% over time. Analysis shows that a version of average inflation targeting that is partly forward-looking—that is, one that responds in part to expected future inflation—could have improved economic outcomes in the recovery from the financial crisis of 2008, as well as substantially reduced the uncertainty around economic outcomes.

Keywords: inflation; average inflation targeting; federal funds rates;