Policy should respond to long-run expectations – Fed study
Such a framework would enhance price stability, paper argues
Explicitly responding to long-run inflation expectations would improve the effectiveness of monetary policy, according to a study from the Federal Reserve Board.
The paper, published earlier this month, says a rule incorporating a response to far-forward expectations could enhance economic and price stability.
The author, Michael Kiley, says such a rule would reinforce inflation anchoring, reduce volatility from slow-moving inflationary forces and mitigate effective lower-bound risks.
Under such a
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