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Inflation Targeting | Open Access Journals
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Journal of Business & Financial Affairs

ISSN: 2167-0234

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Inflation Targeting

Inflation targeting may be a monetary policy where a financial institution follows a particular target for the rate of inflation for the medium-term and announces this inflation target to the general public. The assumption is that the simplest that monetary policy can do to support the long-term growth of the economy is to take care of price stability, and price stability is achieved by controlling inflation. The financial institution uses interest rates, its main short-term monetary instrument.
An inflation-targeting financial institution will raise or lower interest rates supported above-target or below-target inflation, respectively. The first three countries to implement fully-fledged inflation targeting were New Zealand, Canada, and therefore the UK within the early 1990s, although Germany had adopted many elements of inflation targeting earlier. Inflation targeting means Central Banks are liable for using monetary policy to stay inflation on the brink of the agreed target (usually around 2%). ... Inflation targets were introduced to assist reduce inflation expectations and help avoid periods of high inflation which destabilized economies within the 1970s and 80s.

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Journal of Business & Financial Affairs received 1726 citations as per Google Scholar report

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