Considerations Regarding Inflation Ranges

36 Pages Posted: 1 Sep 2020

See all articles by Hess T. Chung

Hess T. Chung

Board of Governors of the Federal Reserve System

Brian M. Doyle

Board of Governors of the Federal Reserve System

James Hebden

Board of Governors of the Federal Reserve System

Michael Siemer

Board of Governors of the Federal Reserve System

Date Written: August, 2020

Abstract

We consider three ways that a monetary policy framework may employ a range for inflation outcomes: (1) ranges that acknowledge uncertainty about inflation outcomes (uncertainty ranges), (2) ranges that define the scope for intentional deviations of inflation from its target (operational ranges), and (3) ranges over which monetary policy will not react to inflation deviations (indifference ranges). After defining these three ranges, we highlight a number of costs and benefits associated with each. Our discussion of the indifference range is accompanied by simulations from the FRB/US model, illustrating the potential for long-term inflation expectations to drift within the range.

JEL Classification: E31, E52, E58

Suggested Citation

Chung, Hess T. and Doyle, Brian M. and Hebden, James and Siemer, Michael, Considerations Regarding Inflation Ranges (August, 2020). FEDS Working Paper No. 2020-75, Available at SSRN: https://ssrn.com/abstract=3684674 or http://dx.doi.org/10.17016/FEDS.2020.075

Hess T. Chung (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
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Brian M. Doyle

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-785-6011 (Phone)
202-263-4843 (Fax)

James Hebden

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Michael Siemer

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.michael-siemer.com

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