ABSTRACT
This chapter examines how central banks have changed their policy procedures after adopting explicit inflation targets. The targets are intended to help central banks achieve and maintain price stability by specifying an explicit goal for monetary policy based on a given time path for a particular measure of inflation. In some cases the targets are expressed as a range for inflation over time, while in other cases they are expressed as a path for the inflation rate itself. Central banks have adopted inflation targets as a strategy for achieving, and then maintaining, price stability. Inflation targeting regimes share several common features. Inflation targets can be set by the government, jointly agreed upon by the central bank and the government, or set by the central bank itself. The ultimate rationale for targets is to help the central bank achieve a desired long-run level of inflation, usually a measured rate of inflation consistent with “price stability.”.
