Does raising an inflation target require increasing the nominal interest rate in the short run? We answer this question using a standard New Keynesian model with rich backward-looking elements. We first analytically show that the short-run comovement between inflation and the nominal interest...

Would raising the inflation target require an increase in the nominal interest rate in the short run?We answer this policy question, first analytically in a small-scale New Keynesian model with backward-looking components where a closed-form solution exists, and then in a medium-scale model of...