Tuesday, January 30, 2007

The Fed isn't close to setting an inflation target

Proponents of an inflation target (including current Chairman Ben Bernanke) believe that the Federal Reserve should set an explicit target of inflation. The most likely target for the US would be a "core" rate (inflation minus food and energy) of 1-2%.

However, while this theory has wide support among academic economists, it does not look as if it will happen anytime soon, due to logistics and some opposition among Fed Governors.

Read more here.

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