While the Federal Open Market Committee (FOMC)—the Federal Reserve’s main monetary policymaking body—has not adopted an explicit numeric inflation target, many individual FOMC participants have been quite forthright about their views on price stability or “comfort zones” for inflation. I am on record as favoring a target in terms of the personal consumption price index of 1.5 percent annual rate of increase plus or minus 0.5 percent.

Controlling Inflation
The issue today is less about the desirability of controlling inflation, or about the appropriate inflation target range, than about the specification of a monetary policy to achieve the agreed objectives of low inflation and a high level of employment.

I personally believe, and have so stated on numerous occasions, that the inflation goal should be quantified. I know that many disagree on this point. In today’s economy, I believe that a quantified inflation goal is not critically important but quantification might be of great importance in the future.

Before anyone jumps to the conclusion that Frankfurt is a stop on my road to Damascus, let this Saul state that for me the case remains open.  Inflation has come down worldwide, in countries without, as well as with, inflation targets.  Moreover, I share David's puzzlement about why an explicit inflation goal should make a substantial difference in performance given the paucity of evidence showing that choosing a target directly affects the level of the public's inflation expectations.  That said, I am relatively more persuaded that inflation targeting helps reduce the variance of inflation expectations.

In a democracy, the public exercises control over government actions, and policymakers are accountable, which requires that the goals of monetary policy be set by the elected government. Although basic democratic principles argue for the government setting the goals of monetary policy, the question of whether it should set goals for the short-run or intermediate-run is more controversial. For example, an arrangement in which the government set a short-run inflation or exchange rate target that was changed every month or every quarter could easily lead to a serious time-inconsistency problem in which short-run objectives would dominate...

 Whether the central bank or the government should set medium-term inflation targets is therefore an open question.

I take this opportunity to reiterate the Federal Reserve’s strong support of the dual mandate; in pursuing maximum employment and price stability, monetary policy makes its greatest possible contribution to the general economic welfare. 

[I]n many countries inflation expectations seemed to shift when the central bank adopted inflation targeting. Public understanding of the central bank's long-run goals and of how the central bank would respond to various potential economic disturbances helps anchor inflation expectations.

It's fairly clear that adopting an explicit empirical objective for inflation is within the Fed's mandate.

From audience Q&A, as reported by Bloomberg News

Inflation targeting is a communication tool. This issue is under review in the committee.  I personally believe that setting a numerical inflation objective does help communication both within the committee and externally.

During Q&A discussion, as reported by Bloomberg News

I should say that I view inflation objectives and the like as being part of the communication tool kit that a central bank may have to try to explain to the markets and to the public what its approach is, what its plans are and how it sees the economy.

We are currently, in the Federal Open Market Committee, conducting a zero-based review of our communications policies, looking at, among them, numerical objectives for inflation, but many other approaches as well, to try to provide more information to the public about our plans and our approach.

So in terms of specifics, I think I would leave that open because our committee has not yet decided what approaches we want to take.

From the Q and A session

While China has increased the flexibility of the renminbi, permitting it to appreciate by 6.5 percent against the dollar since it was officially unpegged in July 2005, it is still much less flexible than the currencies of the Asia crisis countries. The central bank has resisted pressures for more rapid appreciation of the renminbi by intervening in the foreign exchange market and building up its holdings of foreign reserves. Limiting appreciation of the currency in this manner complicates the use of monetary policy to produce an orderly slowdown in China’s currently booming economy.

As an emerging leader within the region, China could also play a major role in promoting regional exchange rate flexibility. For example, Thailand’s Finance Minister recently argued that his nation’s economic conditions would be helped by a faster pace of renminbi revaluation. If China were to move more quickly, it could well encourage even greater exchange rate flexibility among the East Asian fledgling inflation-targeters, as they would be able to pursue their goal of reaching price stability without losing export competitiveness.

Despite the favorable results attained by inflation-targeting countries over time, our evidence generally does not suggest that countries that adopt inflation targeting have improved their monetary policy performance beyond that of our control group of nontargeters, all of which are industrial countries with a successful monetary policy...

Nevertheless, the adoption of inflation targeting can have advantages even for industrial countries. Industrialized countries that have not adopted inflation targeting face four problems (see Bernanke and others, 1999; Mishkin, 2005). First, the strong nominal anchor that produced a successful monetary policy is often based on individuals, and their replacements may not be strongly committed to the nominal anchor. Second, the focus on the long run exhibited by successful nontargeters may weaken in the future. Third, the lack of transparency about the goals of monetary policy increases uncertainty. Fourth, the lack of accountability in the absence of inflation targeting could undermine central bank independence in the future, thereby weakening the nominal anchor.  Inflation targeting has the potential to ensure that the successful monetary policy performance of our control group of industrial nontargeters in recent years continues in the future.

  "I'd prefer an inflation target of zero, assuming it was possible to exactly measure the rate of purchasing power erosion," Poole said in the interview.
  Since that isn't possible, the Fed should establish a core inflation target of 1%-2%, Poole said, according to the article.
  "A lot would be gained in terms of discussions at the Federal Reserve Open Market Committee," Poole said. "The discussion would be clearer because everybody would mean the same thing when they speak of price stability."
  The discussion on the Fed's communication policy, which could result in the adoption of an inflation target, will probably take some time, Poole added.

From a DJ summary of a FAZ interview.

It is a very early stage of the discussion and at this stage I wouldn't read into that [inflation targeting] is inevitable.  I am undecided on this.  I am still studying it...  It should take a while to work through because it is not something you do willy-nilly, it's something you do with great deliberation.

From an interview with Reuters News

I favor an elastic 'medium term' specification for an inflation target, rather than a specific period such as two years.

As reported in the Wall Street Journal

Although the FOMC itself has not adopted a formal, quantitative inflation objective, several members, including me, have said that they believe that greater clarity about the long-run objective would help both the Committee and the markets to make more informed decisions.