The first ISET Research Seminar of the 2026–27 academic year featured Irakli Shalikashvili, Ph.D., Research Assistant Professor at the University of Georgia, USA, who presented his paper, “Did the Fed Do What It Said? Average Inflation Targeting Post-2020.” The seminar took place on October 5 at the ISET Conference Hall.
In August 2020, the Federal Reserve announced that it would stop reacting to month-to-month inflation and start targeting average inflation. The paper examines whether the Federal Reserve followed through on this shift and whether it may help explain why the Fed was slow to raise rates as inflation took off in 2021–22. Estimating the Fed’s interest rate reaction function before and after 2020, the paper finds a clear switch: pre-2020 the Fed responded to current inflation, post-2020 to the 18-month average. In a New Keynesian model, this works much like heavier interest rate smoothing – helpful against supply shocks, but a recipe for delayed action and more persistent inflation when demand shocks hit.
The seminar was organized by ISET resident faculty as part of the ISET Research Seminar Series.
