Lockhart Wants the Fed To Have an Explicit Inflation Target
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Federal Reserve Bank of Atlanta President Dennis Lockhart gave a speech today in support of the Fed adopting an explicit inflation target as he is troubled by the "lack of conviction" in the economy.
Lockhart believes that language the FOMC uses to explain its inflation forecasts at times gets in the way of effectively communicating its ultimate inflation objective. He said one way to eliminate this confusion is to set an explicit numerical objective for inflation.
Lockhart does not believe the headline inflation numbers over the past six months is indicative of the underlying inflation trend. At this point he is wary of an tightening monetary policy.
Lockhart said specifics of an inflation target would need to be worked out by FOMC participants. However he said it should be stated in terms of some measure of overall, or headline, inflation. In addition, he said the target must be achievable over a realistic timeframe which should be "long enough for the objective to be realized at an acceptable cost."
He said an inflation target would not conflict with the FOMC's mandate to support employment.
Lockhart believes that language the FOMC uses to explain its inflation forecasts at times gets in the way of effectively communicating its ultimate inflation objective. He said one way to eliminate this confusion is to set an explicit numerical objective for inflation.
Lockhart does not believe the headline inflation numbers over the past six months is indicative of the underlying inflation trend. At this point he is wary of an tightening monetary policy.
Lockhart said specifics of an inflation target would need to be worked out by FOMC participants. However he said it should be stated in terms of some measure of overall, or headline, inflation. In addition, he said the target must be achievable over a realistic timeframe which should be "long enough for the objective to be realized at an acceptable cost."
He said an inflation target would not conflict with the FOMC's mandate to support employment.
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