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Objective: Work on lowering target inflation On February 1, 2006, Ben S. Bernanke was sworn in as Chairman of the Federal Reserve Board. Although Bernanke

Objective: Work on lowering target inflation On February 1, 2006, Ben S. Bernanke was sworn in as Chairman of the Federal Reserve Board. Although Bernanke is a respected macroeconomist, he succeeded a chairman, Alan Greenspan, who was given high marks for his leadership of the Federal Reserve during a period (1987-2006) of prosperity and low inflation. In the months leading up to the end of Greenspan's term, much speculation surrounded how the Reserve Board would operate under its new chairman. Long before his appointment as chairman, Bernanke proposed that the Fed get involved in inflation targeting. In a 2004 interview, Bernanke was asked if the Fed's previous commitment to price stability was not a de facto inflation targeting policy. Bernanke gave the following response. It is true that the Fed is already practicing something akin to de facto inflation targeting... My main suggestion is... give an explicit target... provide the public with a working definition of price stability in the form of a number or a numerical range for inflation. ...First, such a step would increase policy coherence...Second, there is now...evidence that strongly anchored public inflation expectations are highly beneficial not only for stabilizing inflation but also for reducing output volatility...Third, from the From a communications standpoint, the financial markets would be well served to learn of the Fed's...inflation target... Ask In 2012, the Fed announced that it would target 2 percent inflation. What will be the purpose of setting an explicit inflation target? Response

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