P, 2. &1 Taylor Rule, inflation target, nominal GDP target? After years of debating what kind of rule or target would be the best for monetary policy, or if it even needs to be changed, the announcement in 2020 of flexible inflation averaging targeting (FAIT) by the Federal Reserve made a news splash. Take a look at the rationale behind this decision to better appreciate this change: The Fed Makes Its Biggest Inflation-Policy Change in Decades &= Why Did the Fed Change Its Framework? And Why Does It Matter? (More detailed reading) And it is still very much an ongoing learning in progress as we navigate yet another hurdle where everyone is "taking inflation very seriously" these days: Fed Confronts Why It May Have Acted Too Slowly on Inflation & Notice also inflation expectations in the picture playing a role: "..As high prices have lingered, inflation expectations have been creeping up, threatening to change household and business behavior in ways that perpetuate the problem." We will be coming back to these crucial expectations in the next chapter to see how perceptions can actually become reality in a self-fulfilling prophecy. What did the Fed have to say to all this at the time? Steering Toward Sustainable Growth = What about forward guidance? Are the pros or cons greater in a time like this? For what it's worth, the Fed seemed optimistic about what's to come: Policy Nimbleness Through Forward Guidance = What are your thoughts about the Fed's approach? Do you think we are heading in the right direction? Why or why not? How do you think this framework of flexible average inflation targeting and emphasized forward guidance as a policy tool will affect how effectively the Fed will be able to fulfill its dual mandate: maximum employment and price stability? Please explain using sound economic reasoning