MNI BRIEF: Fed Nods To Shift To Flexible Inflation Target

Federal Reserve officials say the benefits of the 2020 shift to a flexible average inflation targeting framework have diminished and are looking at a strategy of flexible inflation targeting, according to minutes of the May Fed meeting released Wednesday. 

"Participants" said the strategy of flexible average inflation targeting has "diminished benefits in an environment with a substantial risk of large inflationary shocks or when ELB risks are less prominent," the minutes said. "Participants indicated that they thought it would be appropriate to reconsider the average inflation-targeting language in the Statement on Longer-Run Goals and Monetary Policy Strategy."

Fed officials said that an effective monetary policy strategy must be robust to a "wide variety of economic environments," the report said. "They viewed flexible inflation targeting as a more robust policy strategy capable of correcting persistent deviations of inflation from either side of the Committee’s 2% longer-run objective."