New Investment Findings from Federal Reserve Board of Governors Reported (Optimal Monetary Policy With Uncertain Private Sector Foresight): Investment

2025 OCT 24 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- A new study on Investment is now available. According to news reporting from Washington, District of Columbia, by NewsRx journalists, research stated, “We model private-sector expectations in a finite-horizon-planning framework: households and firms have limited foresight when making spending, saving, and pricing decisions.”

The news correspondents obtained a quote from the research from the Federal Reserve Board of Governors, “In this setting, contrary to standard New Keynesian (NK) models, we show that an ‘inflation scare’ problem can arise in which agents’ longer-run inflation expectations deviate persistently from a central bank’s inflation target. We characterize optimal time-consistent monetary policy when there is uncertainty about the planning horizons of private sector agents and a risk of inflation scares.”

According to the news reporters, the research concluded: “We show how risk-management considerations modify the optimal ‘leaning-against-the-wind’ principle in the NK literature with a novel, additional preemptive motive to avert inflation scares.”

This research has been peer-reviewed.

For more information on this research see: Optimal Monetary Policy With Uncertain Private Sector Foresight. Journal of Monetary Economics, 2025;155. Journal of Monetary Economics can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Monetary Economics - http://www.journals.elsevier.com/journal-of-monetary-economics/)

Our news journalists report that additional information may be obtained by contacting David Lopez-Salido, Federal Reserve Board of Governors, Washington, DC 20551, United States. Additional authors for this research include Christopher Gust and Edward Herbst.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jmoneco.2025.103826. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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