Inflation Targeting and Expectations Public
Why the target is 2 percent, what it means for expectations to be anchored, how expectations are measured, why the Phillips curve flattened and then steepened, what credibility buys in a disinflation, how central banks talk, and what 2021–2023 tested. Eight lessons with sources and flashcards.
Lessons in order
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13 min Public
Why two percent?
Where inflation targeting came from, why the target is positive rather than zero, and the argument for raising it.
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23 min Public
Anchored expectations
What anchoring means, why Friedman and Phelps made expectations central, and how anchoring is detected in the data.
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33 min Public
Measuring expectations
Surveys of professionals, households and firms, market-based measures and their risk premia, and why households' expectations look nothing like the target.
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43 min Public
The Phillips curve
The New Keynesian Phillips curve, why the curve looked flat for twenty years, the state-level evidence, and the nonlinearity that returned in 2021.
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53 min Public
Credibility and disinflation
What the ends of hyperinflations and the Volcker disinflation say about the cost of bringing inflation down, and why credibility is the variable that sets the bill.
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63 min Public
Communication
How central banks talk, what the evidence says reaches markets and households, the dot plot, the conditional inflation forecast, and the limits of talking.
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74 min Public
Flexible targeting and its alternatives
Flexible inflation targeting as a loss function, and the makeup strategies proposed for the lower bound: price-level targeting, average inflation targeting, nominal GDP targeting.
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84 min Public
The 2021–2023 test
What drove the inflation surge, whether the anchor held, what the fast disinflation showed, how the frameworks changed, and an exercise on expectations data.