The Federal Reserve is convening experts to discuss overhauling how the world�...
Two related approaches are price-level targeting and average-inflation targeting.
Under price-level targeting, the Fed would pick a starting point and draw a line into the future that would show where prices would be if they rose 2% a year. If the Fed had done that in 2012, it would currently be so far below target that getting back on track would require 2.5% inflation over the next decade.
Instead of targeting prices, policymakers would try to target a level of economic output. For example, the Fed might have said in 2012 it wanted output to rise 4% per year, including inflation. It would bet that over time this would amount to about 2% inflation plus 2% growth in the amount of goods and services produced.
For Congress, which gave the Fed its mandate of fostering stable prices, the whole idea might look odd. NGDP targeting advocate James Bullard, who heads the St. Louis Federal Reserve Bank, concedes it is so experimental it could unleash chaos in financial markets.WILL ANYTHING COME OF THIS?
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