Abstract
The constraint of a zero nominal interest rate requires rethinking how to use monetary policy to stimulate the economy in low-inflation conditions. Central banks are not only the economy's stabilizers, they are also its risk managers. How do they perform both functions? One issue is how to define an inflation target. Another is how to protect the economy from a deflationary shock. As a risk manager, the Fed has thought through its options and has a number of tools at its disposal. Clearer and timelier communication of objectives and actions would also help to make monetary policy more effective.