sack ( 2004 ), “ monetary policy alternatives at the zero bound : an empirical assessment, ” finance and economics discussion series 2004 - 48 ( washington : board of governors of the federal reserve system, september ), for evidence relating to the increased transparency of the fomc over the past several years to the predictability of short - term interest rates. see christina d. romer and david h. romer ( 2004 ), “ choosing the federal reserve chair : lessons from history, ” journal of economic perspectives, vol. 18 ( winter ), pp. 129 - 62. effectiveness based on inferences from the recent experience of regimes that have specific numerical targets, particularly with respect to inflation, around the world. a basic, yet difficult, issue is the selection of a particular price index to guide policy, even in the case of a single goal such as inflation. experience tells us that economies and the composition of productive enterprises change over time, and therefore the appropriate index and inflation value for the monetary authority would also need to change to reflect technological and other advances. in light of this inherent uncertainty associated with the construction of a price index, one might be concerned that choosing and rigidly adhering to an inappropriate index could have negative economic consequences that might outweigh prospective benefits. also, we must consider the ramifications of quantified goals in the context of our democracy. that is, the quantification of objectives becomes even more problematic for central banks such as the federal reserve with multiple democratically based mandates, some of which are notably less disposed to quantification than others. for example, considering our dual mandate from the congress, how do we measure maximum sustainable employment? indeed, as i mentioned previously, estimates of the nairu and other possible related measures that address the full - employment objective such as the output gap have uncomfortably wide confidence intervals and are far more controversial than selecting a target for a specific price index. of course, the central bank could in principle quantify only the inflation objective. however, i fear that quantifying one goal and not the other would present problems because the monetary authority might inadvertently place more emphasis on the quantified goal at the expense of the nonquantified objective. doing so would seem inappropriate. the ease of quantification should not influence how the federal reserve pursues its dual mandate. in addition, i worry about the potential loss of flexibility from the implementation of an inflation target, as explicit numerical goals might inhibit the central bank ’

3 and 10 percent. the recent experience of the united states with inflation has been similar in some respects and dissimilar in others to that of other countries. for example, based on the organisation for economic co - operation and development ’ s measures of overall consumer price inflation, prices rose at an annual average rate of about 3 percent in the united states from 1990 through 2003, compared with about 3 percent in the euro area and in the united kingdom and roughly 1 percent in japan. 1 but, more important, the volatility of inflation was lower in the united states than in these other economies. an equally important indicator of the success of the federal reserve ’ s monetary policy is private expectations for future inflation. measures of inflation expectations obtained from financial asset prices clearly indicate that market participants expect that the federal reserve will maintain low and stable inflation. for example, although the difference between the yields on nominal inflation - indexed and treasury securities is an imperfect measure that includes complicating factors such as inflation risk and liquidity premiums, the five - year break - even inflation rate five years ahead has averaged about 2 - 1 / 2 percent over the past five years and has fluctuated in a narrow range of about 1 - 1 / 2 to 3 - 1 / 2 percent. survey measures confirm that inflation expectations over this period have been subdued and well anchored. the university of michigan ’ s survey of ten - year inflation expectations has averaged less than 3 percent and has stayed within a very narrow range over the past five years. data are from the most recent oecd economic outlook ( no. 75 ) ( excel spreadsheet ). assessing the outcomes with respect to the federal reserve ’ s goal of maximum sustainable output growth is inherently more difficult. estimates of the relevant measures, such as the nonacceleratinginflation rate of unemployment ( nairu ), which in recent years has been decreasing according to some estimates, have very wide confidence intervals. but we can point to some evidence suggesting that the united states has enjoyed, besides subdued and stable inflation, some favorable developments with respect to output and employment. certainly, we can document substantial gains in productivity in recent decades in the united states. according to the oecd, business sector labor productivity growth in the united states averaged about 2 percent from 1990 through the end of 2003, compared with about 1 - 1 / 2 percent in the euro area and in japan over the same period. and since the mid - 1990s, this gap has