Price stability is currently a central focus of U.S. monetary policy.
Because of well-known policy lags and the need for preemptive policy action, the Federal Reserve necessarily uses intermediate indictors to help attain its inflation goals. Currently, there is disagreement among economists as well as Federal Reserve policy makers as to the proper set of intermediate indictors to use in conducting a price stabilizing monetary policy. These problems, together with the recent poor inflation forecasting record of these variables, suggest that alternative policy guides should be considered. Market price indicators are such an alternative useful set of guides to a price stabilizing monetary policy. Recently, these indicators consistently provided reliable signals as to the direction of and to future movements in core general prices.