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Inflation Targeting Or Deflation Avoidance?

Back in the day when I served on the FOMC (February 1991-November 2004) under Alan Greenspan, the subject of inflation targeting came up from time to time. I never liked the idea, but a few of my colleagues expressed an interest. Fortunately, from my point of view, Chairman Greenspan didn't like it and never scheduled a formal debate, not even after Ben Bernanke joined the Committee the first time. Ben made no secret of his support for an inflation target, but he never pushed hard for it back then. It was only after he returned to the Committee as Chairman later did he rally support and push it through.

My opposition to inflation targeting was not very sophisticated. I simply thought of inflation as bad and didn't want to officially condone it. Now we have inflation targeting, and it has become a prominent part of discussions of monetary policy as… Read More …