Average Inflation Targeting and Why the Fed Is Looking at It

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Ever since the Reserve Bank of New Zealand adopted inflation targeting, it became part of all developed central banks mandates. By targeting a certain level for inflation, central banks make sure that inflation is high enough not to threaten the zero level and low enough not to create hyperinflation. 
The problem with inflation targeting is that there is no rules-based system to apply to send inflation to target. The 2% level is considered appropriate by…

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