the monetary policy decision - making process. it is time for the fed to explicitly adopt the flexible inflation targeting framework and in doing so take three steps to strengthen its approach to policymaking. first, clarify and make explicit that our long - run inflation objective is 2 percent year - over - year pce inflation. second, publish information about the individual fomc participants ’ assessments of the appropriate monetary policy that underlie their economic projections in the fomc ’ s summary of economic projections. third, provide information on the fomc ’ s reaction function. that is, communicate policy decisions in terms of changes in the economic conditions that the fomc is using to formulate policy. by helping the public to better understand the policymaking process and better anticipate policy changes, these three steps can make monetary policy more effective in promoting economic stability in accordance with our dual mandate. references kydland, finn e., and edward c. prescott. “ rules rather than discretion : the inconsistency of optimal plans, ” journal of political economy, 85 ( january 1977 ), pp. 473 – 91. plosser, charles. “ the benefits of systematic monetary policy, ” speech to the national association for business economics, washington economic policy conference, march 3, 2008. plosser, charles. “ credible commitments and monetary policy after the crisis, ” speech to swiss national bank monetary policy conference, zurich, switzerland, september 24, 2010. bis central bankers ’ speeches

##makers will adopt a specific reaction function in the near term. yet, there are numerous examples of such systematic approaches or reaction functions that can help us to gauge the stance of policy. some of these reaction functions have been shown to be robust in a variety of circumstances and useful in describing past monetary policy behaviors. they can, i believe, provide useful guidelines for assessing the stance and the likely path of monetary policy. they can also be useful in communicating policy to the public. i frequently consider such reaction functions as i think about policy. these are typically taylor - like rules named for the stanford university economist john taylor who first proposed them in the early 1990s. these policy rules typically call for the targeted funds rate to respond to deviations of inflation from some desired target and to deviations of output from some measure of potential – sometimes referred to as economic “ slack ” or the “ gap. ” sometimes such gaps are translated into deviations from full employment. these policy rules can offer useful guideposts for policymakers and the public in assessing the stance of monetary policy, and communicating more about such guideposts would enhance transparency and help make policy more systematic. thus, there is no need to mechanically follow any particular rule, and judgment will always be required. yet, policymakers and the public should be very cautious when they call for policy rates to deviate in important or significant ways from these guideposts. making such judgments should require careful analysis, and the justification for deviating from such guidelines should be clearly communicated to the markets and to the public. a monetary policy strategy such as i have just described could be communicated through a regular monetary policy report, perhaps published quarterly. the report would offer an opportunity to reinforce the underlying policy framework of the committee and how it relates to current and expected economic conditions. publishing a monetary policy report with an assessment of the likely near - term path of policy rates, in conjunction with its economic forecast, would also provide added discipline for policymakers to stick to a systematic, rule - like approach. communication about that path, in turn, gives the public a much deeper understanding of the analytical approach that guides monetary policy, thus making policy more transparent and predictable. in the current environment, an assessment of a variety of these robust rules suggests that the funds rate target is no longer constrained by the zero lower bound. these rules indicate that liftoff of the funds rate target from zero should have already occurred or should occur in the very near future. it is important to point out that