Indexed Bonds as an Aid to Monetary Policy

A pin&a / long-term goai of Fedeai Reserve monetary poiky is to restore price stability to & United States economy. In this arti&, the author suggests that a measure of th public? inflation expectations would assist the Fed in attaining its goal and proposes that, to prwide such a measure, the U.S. Treasury issue bona % indexed to eliminate loses resukng jivm inflation. T/re article, which originally appeared without tk appendix in this Bank 1991 Annual Report, b reprinted herv to stimul’ate firther dkussion of issues related to the efort to eliminate inflation. T/le v+ws expressed are the author’s and not necessariy those of the Bank or the Federal Reserve System. Contracts requiring payment of dollars in the future for future delivery of goods and services are a regular part of economic life. Workers enter into contracts, formal and informal, for a dollar wage for the next year. Colleges set tuition payments once a year. Rents for apartments are set annually and homeowners contract for mortgage payments i