Keywords: Inflation targeting, monetary policy regime
Abstract: Most inflation-targeting central banks express their inflation objective in terms
of a range for a single official inflation measure but generally have not clarified
the meaning of the ranges and their implications for policy responses. In formulating
policy, all central banks monitor multiple inflation indicators. This paper suggests an
alternative approach to communicating an inflation goal: announcing point-values, rather
than ranges, for a few key reference measures of inflation that are used in making policy.
After reviewing and extending relevant theoretical and empirical studies, the paper argues
that the alternative approach could more accurately reflect the concerns of policymakers and
provide a better accountability structure for monetary policy performance.
Full paper (259 KB PDF)
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Last update: December 16, 2005