This paper explores the theoretical foundations of a new approach to monetary policy. Proponents of this approach hold that when inflation is moderate but still above the long-run objective, the Fed should not take deliberate anti- inflation action, but rather should wait for external...

Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under the opportunistic approach to disinflation a central bank controls inflation aggressively when inflation is...

A number of observers have advocated recently that the Federal Reserve take an "opportunistic" approach to the conduct of monetary policy. A hallmark of this approach is that the central bank focuses on fighting inflation when inflation is high but focuses on stabilizing output when inflation is...