Present two arguments as to why the Fed should adopt inflation targeting as a framework for monetary policy

What will be an ideal response?

Any two of the following four reasons are correct. First, an explicit inflation target will draw the public's attention to the fact that the Fed can only have an impact on inflation and not real GDP in the long run. Second, the public announcement of the target makes it easier for households and firms to form accurate expectations about future inflation. This will increase efficiency in the economy. Third, an announced target would institutionalize good monetary policy and prevent abrupt changes in policy as members of the FOMC changed. Fourth, an inflation target would promote accountability by the Fed. The target would offer a yardstick to measure the performance of the Fed.