Ben S. Bernanke is a member
of the Board of Governors of
the Federal Reserve System. He
received a BA in economics
from Harvard University and a
Ph.D. in economics from the
Massachusetts Institute of
Technology. Before becoming a
member of the Board, he was
on the faculty at Princeton and Stanford Universities. He has also taught at New
York University and at the Massachusetts Institute of
Technology. He has been a visiting scholar at the Federal
Reserve Banks of Philadelphia, Boston, and New York,
where he also served on the Academic Advisory Panel.
Dr. Bernanke has published many articles on a wide
variety of economic issues, including monetary policy
and macroeconomics, and he is the author of several
scholarly books and two textbooks. He served as the
Director of the Monetary Economics Program of the
National Bureau of Economic Research (NBER) and as
a member of the NBER's Business Cycle Dating
Committee.
Inflation targeting—whose major feature is announcement
of a quantitative goal for inflation—is becoming
more widely used as a principal policy instrument of
central banks. Moreover, none of the dozens of banks
that have adopted it have abandoned it. The policy
framework of inflation targeting may be characterized
as “constrained discretion,” albeit with inflation as the primary focus. Maintaining this focus, as well as effectively
communicating it, is essential in containing inflationary
expectations on the part of the private sector.
Although this reduces flexibility of monetary policy, less
flexibility has some advantages of its own. The paper
addresses misconceptions about inflation targeting and
notes that while the Federal Reserve Board has not
explicitly accepted inflation targeting, its recent actions
have been consistent with an inflation-targeting
approach. It also notes the further steps that would be
necessary for the Fed to move further toward inflation
targeting.
By Ben S. Bernanke