Fed's Stern praises inflation targets

Minneapolis Federal Reserve President Gary Stern on Friday 30 October reiterated his support for the introduction of formal inflation targets by the Fed.
Minneapolis Federal Reserve President Gary Stern on Friday 30 October reiterated his support for the introduction of formal inflation targets by the Fed.

"I am in favor of it," Stern said in a speech to the Missouri Valley Economic Association.

"I don't view it as a particularly significant departure from what we have been doing," Stern said. But "a more explicit target would in the end have the potential" to improve accountability for central bankers, as well as enhance communications and improve the consistency of monetary policy over time, Stern said.

Targets would reduce uncertainty about how policy-makers would respond to any given situation in the economy, and would improve accountability, Stern added.

Expectations of future inflation would also be better "anchored" by inflation targets, contributing to sound private-sector decision making, he said.

Inflation outcomes in countries that have introduced formal targets "look quite promising," Stern said.

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