In the words of the January consensus statement, “communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances.” 15 Put differently, the purpose of providing greater clarity about the FOMC’s longer-run inflation goal is to anchor inflation expectations more firmly.
These more firmly anchored expectations in turn free the Committee’s hand to more actively and effectively stabilize short-run fluctuations in economic activity.