The economic impact would depend on the specifics of any Fed strategy shift. But a few common themes emerge when we compare policy interest rates under flexible inflation targeting to the alternative make-up strategies being considered. Fed and academic models suggest the economy returns more quickly to a steady state following a downturn if central banks opt for make-up strategies. Interest rates would likely stay lower for longer than under the present policy framework. If the Fed had adopted a make-up strategy after the financial crisis, it would probably not yet have started to raise rates from post-crisis lows. … (full story)