They therefore want to make it clear that they are endeavouring to attain an average inflation rate of 2 per cent – “average inflation targeting”.17 However, they have not committed to any specific formula for calculating the mean value, for instance, over which period this will apply – hence the term “flexible”. The second important change refers to the view of how the labour market should affect monetary policy decisions. Previously, the wording was that monetary policy was guided by deviations from maximum employment. These deviations could of course be both positive and negative. According to the new wording, decisions will in future be based on an assessment of shortfalls from maximum employment. In practice, this means that low unemployment or high employment as such will not be trigger factors for monetary policy tightening, if inflation is not on its way up. The Fed is thus saying that it will not risk putting the brakes on too early in economic upturns, but will allow them to proceed longer than has perhaps been the case previously. One reason is that if a strong labour market can be retained over a longer period of time, this will benefit weaker groups, which would otherwise have problems obtaining employment. This increases total employment but, interestingly enough, distributional aspects are also considered. These are certainly interesting solutions.

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