But if the inflation target is a forward-looking or a medium-term objective, policymakers will opt for a gradual return of inflation to its medium-term objective under both mandates and the difference in policy responses under the two mandates will be diminished. A second difference related to mandates and strategies is the precision and details of the pricestability objective.
The ECB has an explicit medium-term numerical inflation objective – inflation less than 2 percent (but not less than zero) – while the Fed has a price stability objective but no explicit numerical objective. One would expect that the more precise the price-stability objective, the less flexibility policymakers will have to respond to demand or supply shocks.