In: Economics
Some economists argue the Federal Reserve should only focus on inflation targeting, rather than a broader set of policy objectives. Discuss both the potential advantages & disadvantages of inflation targeting.
The key responsibility of the Federal Reserve is to maintain stability in the economy by regulating the financial indicators. One of the major indicators of the economy is the inflation rate that reflects the health of an economy. Inflation targeting is a part of monetary policy where the central bank has an explicit target inflation rate which it aims to reach and maintain. Inflation-targeting has both advantages and disadvantages. These are described as follows.
Advantages
Disadvantages