This paper uses real-time briefing forecasts prepared for the Federal Open Market Committee (FOMC) to provide estimates of historical changes in the design of U.S. monetary policy and in the implied central-bank target for inflation. Empirical results support a description of policy with an effective inflation target of roughly 7 percent in the 1970s. Moreover, the evidence suggests that mismeasurement of the degree of economic slack was largely irrelevant for explaining the Great Inflation while favouring a passive-policy description of monetary policy. FOMC transcripts provide a neglected interpretation of the source of passive policy–intermediate targeting of monetary aggregates.

Also published as:

Perhaps the 1970s FOMC Did What It Said It Did
Journal of Monetary Economics (0304-3932)
September 2009. Vol. 56, Iss. 6, pp. 842-55