The future of inflation (forecast) targeting –

17 Apr, 2024

Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the thirteenth conference organised by the International Research Forum on Monetary Policy, “Monetary Policy Challenges during Uncertain Times”, at the Federal Reserve Board, Washington, D.C.

Washington, DC, 17 April 2024

Since the early 1990s, many central banks worldwide have adopted a framework for monetary policy known as “inflation targeting”.[1] In this framework, central banks announce a target rate or range for medium-term inflation, typically 2%, and adjust short-term interest rates to steer actual inflation towards the target.[2]

The rise of inflation targeting was a response to the turbulent inflation episodes of the 1970s and 1980s when most central banks were only loosely committed to price stability. Inflation targeting was an acknowledgement that monetary policy was most effective when it was given a clear mandate.

Inflation targeting went hand-in-hand with a discernible increase in…

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