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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page An Inflation Goal with Multiple Reference Measures
William Whitesell

Abstract: Most inflation-targeting central banks express their inflation objective in terms of a range for a single official inflation measure but generally have not clarified the meaning of the ranges and their implications for policy responses. In formulating policy, all central banks monitor multiple inflation indicators. This paper suggests an alternative approach to communicating an inflation goal: announcing point-values, rather than ranges, for a few key reference measures of inflation that are used in making policy. After reviewing and extending relevant theoretical and empirical studies, the paper argues that the alternative approach could more accurately reflect the concerns of policymakers and provide a better accountability structure for monetary policy performance.

Keywords: Inflation targeting, monetary policy regime

Full paper (259 KB PDF)

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Last update: December 16, 2005