Inflation Targeting Regime

Inflation targeting regime uncovers information regarding the inflation target settings adopted by various countries of the world. Inflation targeting is a successful monetary policy regime enforced by an appreciable number of countries in the world. With the passage of time, more and more countries are adopting inflation targeting to maintain an economic stability inside the country.

The priorities and principal objective of central banks all over the world is to attain and maintain price stability of the country. Inflation targeting is a monetary policy, which is used to maintain price stability and inflation rate of a country. Inflation targeting tends to be successful in maintaining the transparency of monetary policymaking. It is also an effective technique in lowering the rate of inflation of the country without any negative consequences.

Two of the main factors normally used to differentiate the inflation targeting regime from other regimes are:

• In the event of enforcing an inflation targeting regime, the Central banks normally announce their inflation targets numerically. The central banks are normally obligated to achieve their targets. In the event, the central banks fail to reach their targets, they are accountable to the public.
• In the second option, the Central banks try to control future inflation, rather than present inflation and while implementing this, they formulate inflation forecasts in periodic manner. After developing inflation forecast periodically, the Central banks make them public. In that case, inflation targeting regime is sometimes called “inflation forecast targeting”.

Inflation targeting regime

Inflation targeting is a sort of monetary policy, which was brought in New Zealand in the year 1990 and as of 2007, an appreciable number of countries are adopting inflation targeting strategy to maintain country’s economic stability. Inflation target is characterized by an announcement of numerical inflation target, a high degree of accountability and transparency. New Zealand is regarded as the first country to adopt inflation targeting formally started operating in 1990. The Canada adopted it in 1991 and the United Kingdom adopted inflation targets in 1992.