My answer is absolutely yes. Adopting an explicit, numerical inflation objective is exactly what is needed right now to help the US economy to recover.

The usual argument for establishing a transparent and credible commitment to a specific numerical inflation objective is that it provides a firm anchor for long-run inflation expectations, thereby directly contributing to the objective of low and stable inflation. Adoption of an explicit, numerical inflation objective has been successful in other countries in keeping inflation from going too high. However, not as well recognised is that an inflation target can help prevent inflation from falling too low. At this critical juncture that benefit can have enormous value.

Until recently, inflation risks were on the upside. But the contractionary shock from the severe disruptions in the financial markets that we have been experiencing lately has shifted the economic landscape completely. Not only has the economy entered a deep recession, but inflation has plummeted. Consumer price index inflation on a year-on-year basis has fallen below 2 per cent, which I would argue is below what would be a sensible inflation objective consistent with price stability; on a three-month basis it has been falling at a negative 10 per cent rate. Core measures of inflation, which strip out food and energy prices and so potentially offer more accurate guides to underlying inflation, also indicate the risks to inflation are on the downside. Core CPI inflation on a year-over-year basis is about 2 per cent, but during the past three months has been below 0.5 per cent.