Federal Reserve's persistent undershooting of its inflation target has sparked comments about a move to price level target at the last two FOMC meetings.
In our view, introducing a price level target would help Federal Reserve return inflation to 2%, but it does face some operational hurdles.
At the current stage we put 15% probability of Federal Reserve adopting a price level target in the coming years and in 2019 at the earliest.
The introduction of a price level target would have a negative impact on the USD.
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