Redistributional Effects of Monetary Policy  Inflation targeting is not a neutral pareto improvement  Any choice of target redistributes from some groups to others  making some worse off For example high inflation harms holders of fixed rate debt  including pensioneers holders of fixed income securities employees with protected jobs and annuitylike compensation including most government employees and policy makers and most tenured academics and creditors  It benefits net debtors  particularly if they have fixed rate debt or debt with interest rate caps  It also benefits owners of commodities real estate foreign currencies equity in export oriented firms local employees in trade sensitive and offshoringcapable sectors and the unemployed  Low inflation benefits holders of fixed rate debt business that export to the target country importers employees who gain from offshoring retired people on fixed pensions and people with protected annuity like wages academics government employees and policy makers  Low inflation therefore tends to favor rentiers  increasing their wealth by boosting the purchasing power of their assets and transfers wealth away from debtors owners of real estate owners of commodities local import sensitive businesses and the insecurely employed  In theory this could be corrected  restoring its neutrality and Pareto improvement however transaction costs moral hazard information asymmetry and political  resistance would make such wealth transfers grossly impractical  To the extent that Monetary policy creates a known and predictable transfer of wealth between a priori known counterparties it is not a neutral economic tool  and cannot be divorced from political considerations and preferred constituencies  Furthermore such constituencies will try to influence choice of monetary policy targets  rentierscreditors and pensioners will prefer tight monetary policy  debtors will prefer looser monetary policy as will exporters and other participants in internationallytradeable sectors of the economy owners of commodities   and real estate and the precariously employed  If redistribution of wealth via such mechanisms has differential efficiency impact and impacts the network of business formation and production within and between trading nations some monetary policy targets may also move an economy away from an efficient frontier  Moral Hazard of Monetary Policy Making Agents   From a principal agent perspective monetary policy makers face  a personal moral hazard  since their compensation typically takes the form of a secure fixed annuity  This would incentivize them to favor tight monetary policy  even at the expense of lower real GDP growth Compensation schemes that made their personal wealth inversely related to the unemployment rate would create a moral hazard in favor of overly loose monetary policy  Compensation schemes that made their personal wealth  contingent on real GDP growth may be more efficient by reducing their overall moral hazard