(Reuters) - Policymakers at the Federal Reserve last month debated providing more detail on the rates of inflation they would like to see and discussed the possibility of adopting a price-level target.
The return of inflation targeting to the Fed’s agenda at the September 21 policy meeting comes as the U.S. central bank grapples with how to lift inflation, which many policymakers view as too low for comfort, and bring down a stubbornly high 9.6 percent unemployment rate.
The Fed is widely expected to embark on a new round of purchases of U.S. government bonds as soon as next month in a bid to provide more support to the economy, and it is mulling other tools, including communications strategies, to boost the effectiveness of its actions.
Officials also considered the possibility of targeting a path for GDP growth, minutes of the September 21 meeting said.
The last time the Fed took a sizable step toward targeting an explicit rate of inflation was when it added longer-term projections to its quarterly economic forecasts in early 2009.
Below are some of the most significant strides toward greater openness the Fed has taken since 1994.
February 1994 -- The policy-setting Federal Open Market Committee begins to release statements announcing interest-rate moves. However, it would remain silent after meetings in which rates were held steady.
February 1995 -- FOMC decides to issue “lightly edited” verbatim transcripts of deliberations with a five-year lag. It also decides to make permanent the policy established a year earlier of announcing interest-rate moves.
August 1997 -- Fed publicly acknowledges policy is formulated in terms of a target for the federal funds rate. FOMC begins to put a number on the intended fed funds rate in its policy-implementing directive to the New York Fed.
December 1998 -- FOMC adopts policy of immediately announcing shifts in bias when it wants to communicate a major change in its views of the balance of risks or likely direction of policy.
December 1999 -- FOMC adopts new procedure on issuing assessments of balance of economic risks, instead of policy bias. The Fed announced the decision in January 2000. The statement issued after the February 2000 FOMC meeting was the first with the new balance of risks language.
March 2002 -- FOMC adopted policy to announce roll call on votes, including whether there were any dissenting voices. Previously the roll call vote was disclosed only when the minutes of the meeting were released.
July 2004 -- The Fed begins to provide a forecast for core inflation, as opposed to overall inflation, in its semiannual monetary policy reports to Congress. Fed officials view core inflation as a better gauge of underlying trends.
December 2004 -- FOMC decides to accelerate the release of minutes of its meetings by making them public three weeks after each gathering as opposed to after the subsequent meeting, a lag of about six weeks.
February 2005 -- For the first time, the Fed provides two-year forecasts in its February monetary policy report to Congress. Previously, the February report contained only forecasts for the current year, with the July report offering forecasts for both the current and coming years. Some analysts viewed the shift as a step toward inflation targeting.
October 2006 -- FOMC discusses the advantages and disadvantages of using a numerical inflation objective. But it says the topic requires further discussion.
March 2007 -- FOMC discusses possible advantages and disadvantages of specifying a numerical price objective for monetary policy, according to minutes of its meeting.
November 2007 -- The Fed says it will increase frequency of its economic forecasts to four times a year from two, and extend the horizon of projections to three years from two.
December 2008 -- FOMC cuts interest rates to a range of zero to 0.25 percent and discusses “added clarity” that could be created by an inflation target.
January 2009 -- FOMC meets by conference call to discuss issues associated with establishing an explicit numerical objective for inflation, but comes to no decision. Officials split between those who say a transparent inflation target would improve policy effectiveness and those who feel extending horizon of regular economic projections could serve the same purpose.
February 2009 -- FOMC adds longer-run projections for GDP, unemployment, and PCE inflation to its three-year forecasts. Most FOMC participant says they want to keep inflation in a 1.7 percent to 2 percent range. The move was seen as effectively establishing an inflation target.
September 2010 -- FOMC debates possible adoption of a price-level target as a tool to affect short-term rate expectations at their September 21 meeting. Officials also discussed targeting a path for the level of nominal GDP, and for providing more information about desirable rates of inflation.
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