Inflation Targeting: Strategies and Impacts on Economic Stability

Introduction Inflation targeting has emerged as a significant monetary policy framework adopted by numerous central banks around the world to achieve price stability. This report examines the concept of inflation targeting, its various strategies, and its impact on economic stability. The purpose of this report is to analyze the effectiveness of inflation targeting in moderating inflation rates and fostering overall economic growth, while also considering potential drawbacks and challenges associated with this approach. By examining empirical evidence and theoretical perspectives, this paper aims to provide a comprehensive understanding of how inflation targeting contributes to economic stability.

Main Body Inflation targeting is defined as a monetary policy strategy where a central bank sets an explicit target for the inflation rate and publicly announces it. This framework was first adopted by New Zealand in 1990 and has since been implemented by many countries, including Canada, the United Kingdom, and Australia. The primary goal of inflation targeting is to maintain price stability, which is seen