Prospects Rise for Fed Easing Policy William Dudley, president of the New York Fed, raised the prospect of the Fed becoming more explicit about its inflation goal to “help anchor inflation...

Prospects Rise for Fed Easing Policy

William Dudley, president of the New York Fed,

raised the prospect of the Fed becoming more

explicit about its inflation goal to “help anchor

inflation expectations at the desired rate.”

Source: ft.com , October 1, 2010

a. What monetary policy strategy is William

Dudley raising?

b. How does inflation rate targeting work and

why might it “help anchor inflation expectations at the desired rate”?