Final answer:
Bernanke leaned away from strict inflation targeting due to its potential rigidity and the necessity to take unemployment into account per Federal Reserve mandates. The Fed balances various economic factors, and strict inflation targeting could conflict with other macroeconomic goals or worsen a recessionary situation if inflation rises due to temporary factors.
Step-by-step explanation:
Former Federal Reserve Chairman Ben Bernanke seemed to move away from proposing inflation targeting as a strict policy framework for the United States due to its potential rigidity and the need for a more balanced approach that also considers other economic factors such as unemployment.
While inflation targeting has been adopted in many countries and often leads to low and stable inflation rates, the Federal Reserve is mandated to consider both unemployment and inflation, thus requiring a balanced approach to monetary policy.
Moreover, the Fed must respond to various economic conditions, which sometimes means that inflation rates above a certain target could trigger a contractionary policy, potentially exacerbating economic downturns if not balanced with other objectives.
In the early 2000s, Bernanke did advocate for an expected inflation rate target of 1-2% but suggested that this target would be flexible, with the Fed undertaking stimulative measures if the expected inflation rate remained below 2%, to close a recessionary gap.
The challenge with strict inflation targeting lies in its potential conflict with other macroeconomic goals and the difficulty of responding to immediate economic changes while focusing on expected inflation rates. This is particularly relevant when inflation may be rising due to temporary factors, such as an increase in oil prices, which could lead to contractionary policies that worsen a recessionary situation.