June 2024

Continuity and Change in the Federal Reserve’s Perspective on Price Stability

David López-Salido, Emily J. Markowitz, and Edward Nelson


By examining statements made by the Federal Reserve leadership since the early 1950s, we establish that there has been considerable continuity in policymakers’ perceptions of the benefits of price stability. Policymakers have consistently contended that deviations from price stability give rise to greater cyclical instability, and they have also frequently suggested that potential output is significantly lowered by inflation. The recurrent support for price stability that comes through in these statements implies that it is invalid to take periods in the U.S. record of deviations from price stability as indicating a policymaker belief in the desirability of inflation.

Keywords: Dual mandate, Federal Reserve, Phillips curve, Price stability, Costs of inflation, Monetary policy objectives, Superneutrality

DOI: https://doi.org/10.17016/FEDS.2024.041

PDF: Full Paper

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Last Update: June 14, 2024