In recent years, the Federal Reserve has apparently leaned against disinflation when core inflation threatens to fall much below 1 percent, and, similarly, against inflation when the core rate threatens to rise above 2 to 2-1/2 percent. The Federal Reserve has demonstrated this strategy without the formal adoption of a specific inflation target or range for the FOMC.
Foreign exchange reserves, on the other hand, bear an opportunity cost representing foregone alternative investments. An efficient international currency system based on pooling or similar concepts will require a lower overall amount of reserves. Of course, such an international system requires political agreement and additional administrative costs associated with managing the reserve pool. A further cost is associated with risk.