ABSTRACT
Monetary economists and central bankers have expressed growing interest in inflation targeting as a framework for implementing monetary policy. There has been some ambiguity about the precise definition of an inflation targeting policy regime, in part because certain institutional arrangements have differed from one inflation targeting country to another—most notably with regard to how the inflation target is set and how deviations from the target are tolerated. Inflation targeting, even without imposing a rigid rule, would unduly reduce the flexibility of the Fed to respond to new economic developments in an uncertain world. The record of inflation targeting countries has been good, but many other countries also have reduced inflation and maintained low rates of inflation even without employing a formal targeting framework.
