Exploring Inflation Targeting: Strategies, Impact, and Future Directions in Economic Policy

Introduction

Inflation targeting has emerged as a prominent framework for monetary policy across the globe, particularly since the late 20th century. This paper aims to explore the strategies employed in inflation targeting, its impacts on economic stability and growth, and the future directions of this monetary policy approach. By examining empirical evidence and theoretical underpinnings, the report seeks to provide a comprehensive overview of how inflation targeting has shaped economic policy and what challenges lie ahead for central banks in this context.

Main Body

Inflation targeting is a monetary policy strategy where a central bank sets a specific inflation rate as its primary goal. This approach aims to maintain price stability while fostering economic growth. The rationale behind inflation targeting is rooted in the belief that low and stable inflation creates a predictable economic environment, which in turn encourages investment and consumption. One of the primary strateg