The experiment starts

The Federal Reserve has taken a large step towards a formal inflation target after chairman Ben Bernanke said that most of its officials think the rate of price rises should be “2 per cent or a bit below”.

For all my carping, I've thought this is a good idea for some time now, but I'm selfish enough to be most excited about what we will learn.  As I wrote:

Professor Sumner’s proposals may not be public policy now. But if there is one thing economists should know, it is that we should not underestimate the power of an idea.

It should be noted that Sumner's first choice is a nominal gdp target and the targeting of a price level, not an inflation rate.


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