March 27, 2018 / 8:05 PM / 8 months ago

Fed's Bostic says sympathetic to adopting price-level targeting

March 27 (Reuters) - Wading into a potentially contentious debate at the U.S. central bank over whether to replace its 2-percent inflation target, Federal Reserve Bank of Atlanta President Raphael Bostic on Tuesday said he favors a new and nearly untested monetary policy strategy known as price-level targeting.

“I am going to add myself to the list of people sympathetic to a policy framework that has a form of price-level targeting at its center,” Bostic said in a post on the bank’s blog.

Price-level targeting differs from the inflation-targeting approach in current use by the Fed and many other central banks because it requires a central bank to allow inflation to run high to make up for periods of low inflation. Former Fed Chair Ben Bernanke and San Francisco Fed chief John Williams are among advocates for switching to price-level targeting. (Reporting by Ann Saphir; editing by Diane Craft)

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