, prompting them to raise markups and prices in anticipation of potentially higher future inflation. These findings establish a … connection between heightened uncertainty, higher core inflation, and increased profits. …

inflation risk. We calculate the term structure of inflation uncertainty in New Keynesian models when the monetary authority … achieves equilibria with substantially lower long-run inflation risk. With either sticky prices or sticky wages, a price path … target reduces the variance of inflation by an order of magnitude more than it increases the variability of the output gap …