It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee's (FOMC's) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation...

The sale of typical securities would force the Fed to contract its lending programs, whereas the sale of Fed bills would not.

In order to maintain its credibility, however, the FOMC will have to take actions consistent with achieving its stated inflation objective.

Policymakers should not think of price stability and economic stability as competing objectives but as complements - the best way to achieve the latter is to be firmly committed to achieving the former.