Inflation targeting is not something you can move into right away.

If we tell the markets openly which target we are aiming at and let us be measured by this and whether we stick to it, we will increase the credibility we have achieved over the past 25 years. This would be another logical step on the Fed's path toward transparency.

[Inflation targeting] would co-ordinate the FOMC's decision making processes, it would improve communication with markets and strengthen the public's trust that prices will stay stable long-term.

I don't know whether the FOMC will at some point adopt a formal inflation target...[But] I suspect it's going to continue to come up.  I don't think the issue is going to die away.

I'm considering, and considering ever more seriously, the benefits of going to an inflation targeting approach...I'm not suggesting we go down this path to fix something that's broken, rather to lock in the benefits of the past.

I generally favor increased transparency and think the benefits of establishing a numerical objective [of inflation] are likely to outweigh the costs.

[The core PCE's] behavior over the last twelve months has been generally quite reasonable—around the value I would endorse as a numerical, long-run inflation objective if the Committee ever were to adopt one. It rose at 1-1/2 percent in 2004.

I believe we have reached a point where institutionalizing inflation targeting simply makes good sense from an economic perspective.

While [inflation targeting] requires more public debate and discussion, it may be an idea whose time is approaching.

I believe that the adoption and announcement of an explicit, numerical, long-run inflation target by the Fed would enhance the effectiveness of monetary policy.

The [latest FOMC minutes] cite three benefits of an explicit price-stability objective: (1) its usefulness as an anchor for long-term inflation expectations, (2) its power to enhance the clarity of Committee deliberations, and (3) its usefulness as a communication tool...I strongly support each of the three reasons given in the minutes in favor of an explicit long-run numerical objective for inflation.

I believe that the Fed’s experience in May and June 2003 indicates that references to inflationary or deflationary risks in the policy statements we now release after every meeting cannot reliably substitute for an explicit inflation target. The statement issued following the May 2003 FOMC meeting asserted that a fall in inflation — then about 1 percent — would be “unwelcome.” This came as a something of a surprise to markets and caused a sharp reaction in long-term rates. If an inflation target range had been in place in 2003 with a lower bound of 1 percent, the public could have inferred the Fed’s growing concern.

There is widespread agreement among central bankers and monetary economists that although, over the long run, it is feasible for the central bank to control inflation, long-run growth and employment are predominantly determined by forces independent of monetary policy. So it makes little sense for the central bank to adopt a long-run objective for growth or employment.

Critics argue that while [the Fed] want[s] the public to believe inflation will remain well-anchored in the future, when the future finally rolls around, [it] might want the flexibility to pursue policies that are inconsistent with the earlier promise implied by an inflation target. In other words, [it] might find the commitment implied by [its] announced inflation target constraining. I would argue that this is a flexibility the Fed should be happy to do without.

There are no circumstances, I would submit, in which expected inflation should be outside of a narrow band around the target for very long.