The Federal Reserve says it has adopted the goal of 2 percent inflation per year. In a Bloomberg View post yesterday, I ignored the interesting question of whether the Fed is serious about attaining that goal and instead argued that it’s the wrong goal. A nominal-spending goal would be better for the economy, and the Fed could adopt it without sacrificing the credibility it has built on inflation since the 1970s. (My foil is one Ben Bernanke.)

Looking back at the post, I should have drawn out one point: This change in goals might increase the Fed’s credibility because it’s a better policy. Strict inflation targeting would require the Fed to take counterproductive actions in response to supply shocks, loosening during booms (when productivity gains pull prices down) and tightening during contractions (when productivity setbacks push prices up). The nominal-spending target I suggest would not call for raising the amplitude of the business cycle in this way. An inflation target that required the Fed to tighten when a negative supply shock has already hurt the economy, or created a presumption that it should tighten in that situation, would put the institution’s credibility to the test; a nominal-spending target would avoid that test.