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Journal Article
The Fed’s New Monetary Policy Framework One Year Later
St. Louis Fed President James Bullard discusses the implementation of the FOMC’s new monetary policy framework, which includes flexible average inflation targeting.
Working Paper
Tempting FAIT: Flexible Average Inflation Targeting and the Post-COVID U.S. Inflation Surge
In August 2020, the Federal Reserve replaced Flexible Inflation Targeting (FIT) with Flexible Average Inflation Targeting (FAIT), introducing make-up strategies that allow inflation to temporarily exceed the 2% target. Using a synthetic control approach, we estimate that FAIT raised CPI inflation by about 1 percentage point and core CPI inflation by 0.5 percentage points, suggesting a moderate impact net of food and energy and a largely temporary effect. Short- to medium-term inflation expectations increased by approximately 0.8 percentage points, while long-term expectations remained ...
The Fed’s New Monetary Policy Framework One Year Later
St. Louis Fed President James Bullard discusses the implementation of the FOMC’s new monetary policy framework, which includes flexible average inflation targeting.
Working Paper
Tempting FAIT: Flexible Average Inflation Targeting and the Post-COVID U.S. Inflation Surge
In August 2020, the Federal Reserve adopted Flexible Average Inflation Targeting (FAIT), permitting inflation to temporarily exceed the 2% target. Using synthetic control methods, we estimate that FAIT raised headline CPI inflation by 1 percentage point and core CPI by 0.5 percentage points, relative to a no-FAIT-adoption counterfactual, with short-lived effects concentrated during the 2021 inflation surge. Short-term inflation expectations increased by 0.8 percentage points, while long-term expectations remained well anchored. Real economic effects were statistically insignificant. The ...