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Looking behind the monetary policy curve

A 'policy-induced' forecast error could happen through organizational mechanism

| U.S.
A screen on the floor of the New York Stock Exchange shows the rate decision of the Federal Reserve on Mar. 16: average inflation targeting may be responsible for the delay in policy actions.   © AP

Masaaki Shirakawa is a former governor of the Bank of Japan.

After the U.S. Federal Reserve finally raised its base interest rate by 25 basis points on Mar. 16, future historians without any prior knowledge of the current situation will surely be surprised to learn that the Fed's new federal fund target rate range of 0.25% to 0.5% was set against a consumer price inflation rate of 7.9%.

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