Inflation to the Rescue
09/11/2012 | | Bernanke, federal reserve, Inflation, NGDP level targeting, NGDP Nominal GDP targeting, The Fed
Rather than more quantitative easing, the Fed should stop targeting inflation and instead aim for a consistent level of nominal (unadjusted for inflation) GDP (NGDP) growth over the cycle. With this approach, the Fed would goose NGDP growth when times are bad (like now), by allowing more inflation, but restrain inflation when times are good. This way the Fed can use inflation rather than ignoring it to accomplish its goals.