After two decades of successfully restoring price stability in much of the world economy, central banks begin the next millennium facing a new set of challenges. One key task is how to conduct monetary policy in an era of price stability. Clearly, policymakers would like inflation to remain...

Most central banks conduct monetary policy by setting targets for overnight interest rates. During the 1990s, central banks have tended to move these interest rates in small steps without reversing direction quickly, a practice called interest rate smoothing. For example, the majority of Federal...

Summary of proceedings from the 1986 Fall Academic Conference sponsored by the Federal Reserve Bank of San Francisco

A history and analysis of the debate about whether monetary policy should be conducted by rules known in advance to all or by policymaker discretion.

Despite the low inflation of recent years, some observers have wondered whether rapid gains in U.S. asset prices foreshadow rising inflationary pressures. Would U.S. monetary policy be improved if Federal Reserve policymakers reacted systematically to changes in the prices of widely held assets...

Many analysts have advocated using commodity prices as a guide for monetary policy. A necessary condition is that changes in commodity prices are good predictors of future aggregate price changes. This paper examines that proposition. It shows that while commodity prices can help produce more...

The Neal Resolution, now in Congress, would make price stability the dominant goal of monetary policy. The first of these two articles holds that policymakers’ discretion over the price level increases political conflict. Further, it argues that removing this discretion would restore the...