US: The subtle push for price level targeting continues – Danske Bank

The Federal Reserve’s persistent undershooting of its inflation target sparked comments about a move to price level target at the past two FOMC meetings, notes the research team at Danske Bank.

Key Quotes

“In our view, introducing a price level target would help the Federal Reserve return inflation to 2%, but it would face some operational hurdles.”

“At the current stage we put 15% probability of the Federal Reserve adopting a price level target in the coming years and in 2019 at the earliest.” 

“The introduction of a price level target would have a negative impact on the USD.”