The vice president of the Fed, changed his point of view concerning fixed inflation goals. Only four years ago, Donald Kohn said he was very skeptical about the Federal Reserve maintaining these goals. But now he says the subject is open for debate. Unlike other central banks the Fed doesn't have such goals which refects in less stable prices. Kohn admits the advantages of the system. When fixed inflation goals are established, it becomes much easier for governments and companies to plan their investments. Even the president of the Fed, standing on the right in the picture next to Donald Kohn, has already plead for fixed inflation goals. He thinks that in this way the transparency of the Federal reserve will improve.
Personally I think that it's dangerous to focus too much on the prices. But it's hard for the Fed not to, because of the housing bubble. There were lots of social dramas due to rapid rise of the asset prices. So the public opinion wants this fixed as soon as possible.
When focussing on prices the Fed risks to lose other items like employment out of sight.
I don't argue the fact that fixed inflation goals have proven their use for other central banks, like the European central bank. But I think you can't condem the American system due to the housing bubble. This would have happened even if there were fixed inflation goals. There would still be low interest rates which resulted in long-term mortgages. I just want to say, you can't condem a whole system, which has already often proven his use, by one event.
Thomas
source: http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3226121
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