From tacit to (almost) explicit: inflation targetting at the Fed

From the latest press release of the US Federal Reserve Board:

The central tendency of FOMC participants’ longer-run projections, submitted for the Committee’s January 27-28 meeting, were:

  • 2.5 to 2.7 percent growth in real gross domestic output
  • 4.8 to 5.0 percent unemployment
  • 1.7 to 2.0 percent inflation, as measured by the price index for personal consumption expenditures (PCE).

Most participants judged that a longer-run PCE inflation rate of 2 percent would be consistent with the dual mandate; others indicated that 1-1/2 or 1-3/4 percent inflation would be appropriate.

Speaking earlier in the day, Fed Chairman Ben Bernanke observed:

These longer-term projections will inform the public of the Committee participants’ estimates of the rate of growth of output and the unemployment rate that appear to be sustainable in the long run in the United States, taking into account important influences such as the trend growth rates of productivity and the labor force, improvements in worker education and skills, the efficiency of the labor market at matching workers and jobs, government policies affecting technological development or the labor market, and other factors. The longer-term projections of inflation may be interpreted, in turn, as the rate of inflation that FOMC participants see as most consistent with the dual mandate given to it by the Congress–that is, the rate of inflation that promotes maximum sustainable employment while also delivering reasonable price stability.

(Hat tip: Calculated Risk)

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