Continuity and Change in the Federal Reserve’s Perspective on Price Stability

We examined statements made by Federal Reserve leadership since the early 1950s and established there has been considerable continuity in policymakers’ perceptions of the benefits of price stability. Policymakers have consistently contended that deviations from price stability give rise to greater cyclical instability, and they have also frequently suggested that potential output is significantly lowered by inflation. The recurrent support for price stability that comes through in these statements implies that it is invalid to interpret deviations from price stability in the U.S. economy as an indication that policymakers seek inflation.