[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-seo-324903-105":3,"detail-sidebar-cat-0-en-105":81,"doc-detail-324903-en":130},{"code":4,"msg":5,"data":6},0,"ok",{"site_id":7,"language":8,"slug":9,"title":10,"keywords":11,"description":12,"schema_data":13,"social_meta":74,"head_meta":76,"extra_data":78,"updated_unix":80},105,"en","price-stability-issues-and-challenges","Price Stability - Issues and Challenges","","Speech excerpt defining price stability as low, stable inflation over time plus credible public confidence that inflation will remain low. It argues central banks must manage not only inflation rates but also inflation expectations, since expectations can “unglue” under incentives to use artificially low short-term interest rates or amid rising inflation uncertainty. It discusses credibility tests during less favorable economic conditions and outlines potential risks such as relative price shocks, extraordinary liquidity crises, and deficits, emphasizing communication clarity and transparency.",{"@graph":14,"@context":73},[15,34,56],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/document/","Document",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/document/research-report/","Research & Report",3,{"item":32,"name":10,"@type":21,"position":33},"https://docshare.wps.com/document/price-stability-issues-and-challenges/324903/",4,{"url":32,"name":10,"@type":35,"image":36,"author":41,"headline":10,"publisher":44,"fileFormat":47,"inLanguage":8,"description":12,"dateModified":48,"datePublished":49,"encodingFormat":47,"isAccessibleForFree":50,"interactionStatistic":51},"DigitalDocument",{"url":37,"@type":38,"width":39,"height":40},"https://docshare.wps.com/thumbnails/price-stability-issues-and-challenges/324903.png","ImageObject",300,407,{"name":42,"@type":43},"Aurelia","Person",{"url":19,"name":45,"@type":46},"DocShare","Organization","application/pdf","2026-11-05","2026-09-21",true,{"@type":52,"interactionType":53,"userInteractionCount":55},"InteractionCounter",{"@type":54},"ViewAction",10,{"@type":57,"mainEntity":58},"FAQPage",[59,65,69],{"name":60,"@type":61,"acceptedAnswer":62},"How does the speech define price stability?","Question",{"text":63,"@type":64},"It defines price stability as an environment where inflation is so low and stable over time that it does not materially enter households’ and firms’ decisions. It has two essential characteristics: low, stable actual inflation and strong confidence that inflation will remain low and stable.","Answer",{"name":66,"@type":61,"acceptedAnswer":67},"Why is controlling inflation expectations important?",{"text":68,"@type":64},"Because price stability depends on keeping both inflation and inflation expectations in check. Even when current inflation looks contained, expectations can become unanchored if central banks appear likely to yield to pressures.",{"name":70,"@type":61,"acceptedAnswer":71},"What inflationary risks are highlighted for the future?",{"text":72,"@type":64},"The speech focuses on three familiar risks: relative price shocks, extraordinary liquidity crises, and the deficit problem, explaining how each could challenge central banks’ ability to maintain low and stable inflation.","https://schema.org",{"og:url":32,"og:type":75,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":77,"canonical":32},"index,follow",{"doc_id":79,"site_id":7},324903,1790113379,{"code":4,"msg":82,"data":83},"success",[84,88,92,96,101,106,111,115,120,123,126],{"id":22,"doc_module":4,"doc_module_name":25,"category_name":85,"show_sort_weight":86,"slug":87},"Story & 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thatprice stability is a top priority forcentral bankers around the world.For the European Central Bank,price stability is the sole objec-tive.For the Federal Reserve,it isone pillar of our dual mandate,theother being maximum sustainableeconomic growth.  \nCentral banks have done a veryimpressive job of achieving lowand stable rates of inflation inrecent years.Despite our past suc-cesses,however,we must alwaysstand ready to deal with challengesthat could eventually confront us.1 will discuss some of those chal-lenges and how central banksmight best prepare for them.  \nFirst,I wil explain why maintain-ing price stability requires morethan just keeping inflation low—italso requires keeping inflationexpectations low and secure in theface of potential inflationary risks.Second,I will describe some ofthose inflationary risks that maybecome significant down the road.Finally,I will discuss why,in theface of these risks,the ability ofcentral banks to maintain price sta-bility will depend on the clarityand transparency of their commu-nications.  \nPlease note that my comments aremy own;I do not presume to speakfor any of my colleagues on theFederal Open Market Committee.  \n# Price Stability:Issues and Challenges\n\n■Maintaining Price StabilityRequires More than JustKeeping Inflation LowA few years ago,former FederalReserve Chairman Alan Greenspanstated that \"price stability is bestthought of as an environment inwhich inflation is so low and stableover time that it does not mate-rially enter into the decisions ofhouseholds and firms.”This is afairly common definition of pricestability,and it has two essentialcharacteristics.First,actual infla-tion must remain low and stableand,second,people must haveevery confidence that inflation willremain low and stable.This secondcharacteristic may not get as muchemphasis as it deserves.Price sta-bility is more than keeping infla-tion in check—it also means keep-ing inflation expectations in check.  \nOf course,actions speak louderthan words,and ultimately,thepublic will judge the central bank'sresolve to keep inflation low andstable by whether it actually deliv-ers low and stable inflation.Butcan inflation expectations comeunglued in the face of some as-yet-unrealized threat?  \nI think most of us recognize thatunder some circumstances,expec-tations can become unglued evenif the current inflation measuresappear contained.From time totime,there are pressures on a cen-tral bank to \"buy\"relief from eco-nomic troubles with artificially lowshort-term interest rates.The pub-  \nJune 2007  \nCentral banks have done a veryimpressive job of achieving lowand stable rates of inflation inrecent years.But despite pastsuccesses,they must always beready to deal with new challengesthat might arise.Sandra Pianalto,president and CEO of the FederalReserve Bank of Cleveland,dis-cusses some of those challengesand how central banks might bestprepare for them,in a speech shegave at a conference sponsored bythe Deutsche Bundesbank and theCleveland Fed in Frankfurt,Ger-many,on June 6,2007.  \nlic understands these pressures,ofcourse,and if it believes that thecentral bank will yield to the pres-sures,inflation expectations canrise.Also problematic is that infla-tion uncertainty can rise.Both ofthese outcomes impose costs onthe economy by misdirecting theway resources are allocated.Mostnotably,long-term interest ratesmay move higher than they other-wise would,interfering with savingand investment decisions.  \nCentral bankers face an unpleasantdilemma when inflation expecta-tions become unanchored.Centralbanks could validate these risingexpectations by actually deliver-ing higher inflation,but that out-come would be contrary to ourpolicy objective.Alternatively,  \ncentral banks could pursue policiesthat generate lower inflation thanthe public expected.This,in myopinion,is the correct course,butthere can be costs in terms of lowershort-term growth—costs thatwould not be incurred if expec","cbCaiasXYM16T2G4","https://ap.wps.com/l/cbCaiasXYM16T2G4","pdf",1095059,"English","# Price Stability: Issues and Challenges\n## Maintaining Price Stability Requires More than Just Keeping Inflation Low\n## Potential Inflationary Risks Down the Road","[{\"question\":\"How does the speech define price stability?\",\"answer\":\"It defines price stability as an environment where inflation is so low and stable over time that it does not materially enter households’ and firms’ decisions. It has two essential characteristics: low, stable actual inflation and strong confidence that inflation will remain low and stable.\"},{\"question\":\"Why is controlling inflation expectations important?\",\"answer\":\"Because price stability depends on keeping both inflation and inflation expectations in check. Even when current inflation looks contained, expectations can become unanchored if central banks appear likely to yield to pressures.\"},{\"question\":\"What inflationary risks are highlighted for the future?\",\"answer\":\"The speech focuses on three familiar risks: relative price shocks, extraordinary liquidity crises, and the deficit problem, explaining how each could challenge central banks’ ability to maintain low and stable inflation.\"}]","Price Stability - Issues and Challenges | PDF",1789969183,13]