This process of careful study and discussion proved highly valuable during the development and implementation of inflation targeting in decades past, and will be equally valuable in the present debates. Thank you. 1 See Federal Reserve to review strategies, tools, and communication practices it uses to pursue its mandate of  maximum employment and price stability, November 15, 2018. 2 Shigeaki Fujiwara, Yuto Iwasaki, Ichiro Muto, Kenji Nishizaki, and Nao Sudo, Developments in the Natural Rate  of Interest in Japan, Bank of Japan Review 2016-E-12 (October 2016); Kathryn Holston, Thomas Laubach, and John C. Williams, Measuring the Natural Rate of Interest: International Trends and Determinants, Journal of International Economics, Volume 108, Supplement 1, pp. S59–S75 (May 2017); Thomas Laubach and John C. Williams, Measuring the Natural Rate of Interest Redux, Business Economics, Volume 51, Issue 2, pp. 57–67 (July 2016); John C. Williams, Monetary Policy in a Low R-star World, FRBSF Economic Letter 2016–23 (August 15, 2016). 3 Carlos Carvalho, Andrea Ferrero, and Fernanda Nechio, Demographic Transition and Low U.S. Interest Rates,  FRBSF Economic Letter 2017–27 (September 25, 2017); Marco Del Negro, Domenico Giannone, Marc P. Giannoni, and Andrea Tambalotti, Safety, Liquidity, and the Natural Rate of Interest, Brookings Papers on Economic Activity, Spring 2017. 4 John C. Williams, The Future Fortunes of R-star: Are They Really Rising? FRBSF Economic Letter 2018–13 (May  21, 2018).
This downward shift in inflation expectations has a secondround effect on real interest rates, the economy, and inflation. When policy is constrained by the effective lower bound, the downward shift in inflation expectations raises the real interest rate, further diminishing the degree of monetary stimulus, making the downturn worse and reducing inflation even more. Even in times when policy is not constrained, the expectation of belowtarget inflation in the future affects current decisions, putting additional downward pressure on inflation. In other words, monetary policy is always swimming upstream, fighting a current of toolow inflation expectations that interferes with achieving the target inflation rate. A number of alternative monetary policy frameworks have been proposed that aim to tackle the problems associated with the lower bound on interest rates. Although they differ in many ways, it is useful to divide these proposals into three broad categories. The first option is to maintain the basic framework of inflation targeting and to rely on a combination of aggressive conventional and unconventional policy actions when facing economic downturns to limit the deleterious effects of the lower bound. This carries with it the risk that inflation expectations become anchored at too low a level. The second option is “average-inflation targeting,” whereby the central bank purposefully aims to achieve an above-target inflation rate in “good” times when the lower bound is not a constraint.