4/5/2023 0 Comments What is empirical risk![]() One way central banks have sought to anchor expectations is through a commitment to an explicit longer-run inflation goal. The critical importance of anchoring inflation expectations is now enshrined as a bedrock principle of modern central banking. This is the perfect time to give the usual Federal Reserve disclaimer that everything I say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or anyone else in the Federal Reserve System. I should emphasize the word “initial,” since we are still in the midst of the storm, and definitive conclusions on the anchoring of expectations will await the ship’s safe return. I will then provide an initial assessment of the behavior of inflation expectations in the United States against these three criteria since inflation surged in the spring of last year. ![]() But, what does it mean for inflation expectations to be well anchored, and how would we know if they are? In my remarks, I will describe three criteria for well-anchored inflation expectations. Against the backdrop of the stormy seas of the global inflation of the past year and a half, a steady anchor is more critical than ever. It is a pleasure to be here today to discuss a timely and important topic: the anchoring of inflation expectations. ![]()
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