inflationtargeted
Inflation targeting is a monetary policy regime in which a central bank publicly commits to achieving a specified numerical target for inflation, usually measured by the consumer price index (CPI), over a defined horizon. The framework emphasizes transparency, credibility, and accountability, and relies on the central bank’s ability to steer inflation expectations through its policy instruments.
Key features include an explicit inflation target announced publicly, a symmetric band or level, a forecast-based
Targets are typically CPI inflation around 2%, with a horizon of one to three years. The framework
Advantages include greater credibility and transparency, better expectation anchoring, and lower inflation bias. Critics note potential
Origin and adoption: Inflation targeting emerged in the late 1980s and early 1990s, with New Zealand as