Taming Inflation Scares

14 Pages Posted: 28 Mar 2022 Last revised: 29 Mar 2022

See all articles by Athanasios Orphanides

Athanasios Orphanides

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Asia School of Business

John C. Williams

Federal Reserve Bank of New York

Date Written: March 28, 2022


A monetary policy strategy that keeps inflation expectations solidly anchored in line with a clearly communicated definition of price stability supports the achievement of both price stability and economic activity goals. Providing an enduring nominal anchor succeeds in taming inflation scares and allows the Fed to respond more effectively to economic downturns. This was a key policy message in Marvin Goodfriend’s 1993 article “Interest Rate Policy and the Inflation Scare Problem: 1979-1992”. This essay connects Goodfriend’s important and timely paper to the academic and policy debates of the period and traces its influence on subsequent monetary policy research and the evolution of the Federal Reserve’s monetary policy strategy and communication.

Keywords: Inflation Scares, Inflation Expectations, Federal Reserve, Monetary Policy

JEL Classification: E52, E58

Suggested Citation

Orphanides, Athanasios and Williams, John C., Taming Inflation Scares (March 28, 2022). MIT Sloan Research Paper 6628-22, Available at SSRN: https://ssrn.com/abstract=4068920 or http://dx.doi.org/10.2139/ssrn.4068920

Athanasios Orphanides (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=54058

Asia School of Business ( email )

Jalan Kuching, Kuala Lumpur, Wilayah Persekutuan K
Kuala Lumpur, MA

John C. Williams

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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