SUERF Policy Brief A Better Benchmark for Monetary Policy?

However, the principles applied to price stability can be applied easily to the other goals individually and potentially on a weighted basis (to reflect the priorities of the Fed). [...] An inordinate amount of media time is devoted to analysing and parsing the statements of the central banks, the speeches of individual governors, the “dot plots” etc. [...] How would this map out graphically to allow market participants to track where the economy is relative to the Fed target and individuals are not penalized for previous periods of “hot” inflation even if the rate of PCEPI returns to 2% p.a? In the case of the rolling 10-year period from October 2013 – 2023, as Figure 2 demonstrates, the Fed should probably be raising rates – not lowering them in 20. [...] Hence the importance of specificity in the details of policy are important for not only the market participants but for Congress to know how the Fed is performing relative to objective measures. [...] The views expressed are those of the authors and not necessarily those of the institutions the authors are affiliated with.