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The Bank of Japan under Governor Kuroda’s leadership will make an important ideological shift to “targeting inflation,” a U-turn from “tolerating deflation” over the last decade or so.
The bank has suggested it may raise interest rates to deflate a potential housing bubble.
Focusing exclusively on short-term fluctuations in economic data is distracting us from important underlying trends.
So now it’s official: the Fed is an inflation targeter.
Before Nobel laureates Tom Sargent and Chris Sims developed their methods, economists and policymakers had no rigorous way to incorporate expectations into their statistical models.