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Journal Article
Conducting monetary policy with inflation targets
Since the early 1990s, a number of central banks have adopted numerical inflation targets as a guide for monetary policy. The targets are intended to help central banks achieve and maintain price stability by specifying an explicit goal for monetary policy based on a given time path for a particular measure of inflation. In some cases the targets are expressed as a range for inflation over time, while in other cases they are expressed as a path for the inflation rate itself. The measure of inflation that is targeted varies but is typically a broad measure of prices, such as a consumer or ...
Journal Article
Wage behavior in the United States: 1907-80
Journal Article
Progress toward price stability: a report card for 1994
The Federal Reserve tightened monetary policy six times in 1994. The purpose of these policy moves was to encourage sustainable, noninflationary economic growth. Early actions were taken to move monetary policy toward a less accommodative stance than was followed in 1993. Later actions were taken "against the backdrop of continuing strength in the economic expansion and high levels of resource utilization." These later actions were intended "to keep inflationary pressures contained, and thereby foster sustainable economic growth." All of the actions were in keeping with the Federal ...
Journal Article
The role of community banks in the U.S. economy
The U.S. banking system is unusual in consisting not only of some very large banks but also a large number of relatively small community banks. This bifurcated banking system in the United States has served the economy well. Over time, with regulatory change and financial innovation, large banks have become complex organizations engaged in a wide range of activities. They provide a variety of services to their customers, but often rely on hard financial information, computer models, and centralized decision-making as the basis for conducting business. In contrast, small banks have focused ...
Journal Article
What is the optimal inflation rate?
With inflation in the United States and elsewhere low by historical standards, the question of what inflation rate policymakers should aim for has moved front and center. Knowing what inflation rate to aim for is critically important for maximizing the economic well-being of the public. ; Most policymakers agree they should not allow inflation to fall below zero because the costs of deflation are thought to be high. They disagree, however, about how much above zero, if any, central banks should aim to keep inflation. Unfortunately, rigorous estimates of an "optimal inflation rate" have ...
Journal Article
Possible monetary policy responses to the Iraqi oil shock
Journal Article
The role of money in monetary policy: why do the Fed and ECB see it so differently?
Monetary policymakers and central banks universally recognize that, in the long run, inflation is strictly determined by monetary policy. However, they disagree sharply about the role of monetary aggregates in the conduct of monetary policy. ; These differences in views are reflected in the way the Federal Reserve and the ECB conduct monetary policy and communicate with the public. At the Federal Reserve, the Federal Open Market Committee no longer specifies targets or monitoring ranges for the monetary aggregates, and committee members seldom mention the aggregates in their deliberations. In ...
Journal Article
Communicating a policy path: the next frontier in central bank transparency?
In the last two decades, central banks have taken a variety of steps to increase the transparency of monetary policy. Today, many economists are suggesting ways to further increase transparency. One area of considerable interest is the outlook for the future path of the policy rate. The policy rate is the short-term, typically overnight, interest rate that central bankers use to adjust the stance of monetary policy. While central banks typically announce changes in the policy rate when they occur, very few central banks provide an explicit description of where the policy rate is likely to be ...
Journal Article
Inflation and disinflation: a comparison across countries
Journal Article
Taylor rule deviations and financial imbalances
Over the last quarter century, the U.S. economy has faced a number of financial shocks originating in a variety of sectors and locations around the globe. While most of these crises have had little or no effect on the United States, the recent financial crisis caused the worst U.S. recession since the Great Depression. ; The causes of these crises are varied. To some extent, however, a buildup of financial imbalances preceded each crisis. In some cases, asset prices rose to unsustainable levels inconsistent with market fundamentals. In other cases, a buildup of foreign debt precipitated a ...