My view is that we should further study how PLT frameworks might work in practice. 15 But, it is possible that a simpler approach of committing to keeping the average inflation rate around 2 percent over the medium term might be just as appealing. It might be sufficient to better anchor inflation expectations while avoiding the communication challenges and complexity of an asymmetric PLT regime. In this vein, I also would evaluate whether the inflation goal should be recast as a range of, perhaps, 1½ to 2½ percent, from the current 2 percent objective. A range might have several advantages over a point target. First, it might be viewed as more realistic given that measured inflation will always randomly fluctuate relative to its underlying trend. That is to say, even if the FOMC performs its job exceedingly well, very rarely will the inflation rate, as measured by the PCE price index, be precisely at 2 percent. Second, having a relatively narrow range would send a message that the FOMC is discriminating between two regimes—one in which inflation is within the range and concerns about inflation are low, versus another in which inflation is outside the range and concerns about inflation are more elevated. Even so, I would not recommend shifting to such a range currently. I would only consider doing so once the FOMC has successfully and sustainably pushed inflation back to its 2 percent objective.
2  Defining dependence as the percentage of natural capital in total capital (i.e., natural, physical, and human) and abundance as the amount of per capita commodity exports in 1970. 2  BIS Review 106/2009  on comparative advantages, but it also induces better practices and technologies, as well as more competition in the markets, all factors that enhance economic growth. On the other hand, we know that Chile is rich in natural resources, especially mining ores, but our dependence on them is ever smaller. Actually, mining exports contribute every year a large amount of resources to the country, but their share of total exports has steadily declined over time, with the exception of the last few years due to the soaring price of copper (figure 3). Another critical element mentioned in the literature, that for Chile is a strong one, is the quality of its institutions. Sound institutions, including fiscal discipline, have prevented the “voracity” effects. A well educated labor force and full access to international capital markets have kept investments in other activities free of barriers, and the real exchange rate, although widely fluctuating, has not been detrimental to the development of the exporting sector. By way of example, and to see the good position we are in now as compared with previous years, let us recall what happened with nitrate.