Fed’s Inflation Goal May Raise Issues, Bini Smaghi Writes in FT
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The Federal Reserve’s decision to set a numeric inflation goal over the longer run may raise communication issues, former European Central Bank Executive Board Member Lorenzo Bini Smaghi wrote in the Financial Times.
Monetary policy produces its effects with two or three-year lags, meaning a longer-term inflation objective makes the inflation forecasts and the policy decision “unclear,” as the long-run isn’t a “policy-relevant” time frame, Bini Smaghi wrote in an article posted on the newspaper’s website today.