Are Inflation Targets Good Inflation Forecasts?
Last Updated: 05/05/08
The growing use of inflation targeting and other forms of quantified inflation objectives has marked the history of monetary policy since 1990. Indeed, a majority of industrialized countries have either adopted some form of inflation targeting or, most notably for the 15 countries that have adopted the euro, defined a quantified inflation objective. In the United States, the Federal Reserve System aims to conduct the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of “maximum employment, stable prices, and moderate long-term interest rates.” The Fed does not have an inflation target.