Fed Insiders Push for Radical Policy Revamp

The video discusses the concept of inflation targeting, focusing on the common 2% target adopted by many central banks, including the Federal Reserve. It explains the rationale behind this target, such as providing a cushion against deflation. The video also addresses the challenges faced in achieving this target, particularly due to the falling neutral interest rate. It highlights the implications of these changes for future monetary policy, including the potential need for new strategies to address economic challenges.

Which country was an early adopter of the 2% inflation target?

• Australia

• United States

• Canada

• New Zealand

What is one reason the 2% inflation target was considered appropriate?

• It was randomly chosen.

• It is the lowest possible inflation rate.

• It provides a cushion against deflation.

• It is the highest inflation rate ever recorded.

What is a significant challenge mentioned in achieving the 2% inflation target?

• Rising oil prices

• High unemployment rates

• Shortfall in inflation

• Excessive government spending

What has happened to the neutral interest rate over the years?

• It has increased significantly.

• It has become irrelevant.

• It has remained constant.

• It has fallen significantly.

According to the Federal Reserve Board paper, what percentage of time might the Fed spend at the zero lower bound?

• 40%

• 10%

• 25%

• 60%