As we noted earlier, the only exciting bit of the FOMC minutes released on Tuesday was this:
Participants noted a number of possible strategies for affecting short-term inflation expectations, including providing more detailed information about the rates of inflation the Committee considered consistent with its dual mandate, targeting a path for the price level rather than the rate of inflation, and targeting a path for the level of nominal GDP.
In his speech on Friday, Bernanke chose only to comment on the first of those three ideas. This was helpful (if not exactly revealing), and the reports about the speech indicated that it was a step towards formalizing a previously understood 2 per cent target inflation rate.
That sounds right, but given the speech’s title — “Monetary Policy Objectives and Tools in a Low-Inflation Environment” — we hoped he might comment at least on targeting the price level (which is distinct from having a formal target for the inflation rate).
Things have changed since Jackson Hole, when Bernanke said that he saw no support on the FOMC to “increase its medium-term inflation goals above levels consistent with price stability.” That’s what targeting a price level would require, and since then it’s been seriously considered by at least two Fed presidents.
We’ll stop harping on about this now, and it would have been too much to hope for Bernanke to say anything conclusive ahead of the November FOMC meeting — but he didn’t even bring up the idea, if only to discuss its merits and drawbacks.
Monetary Policy Objectives and Tools in a Low-Inflation Environment – Fed
Inflation targeting and the FOMC – FT Alphaville