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Amid a wide range of options, inflation targeting remains the simplest and least bad

The rationale for inflation targeting has three components. 

The first is that one instrument — in this case, monetary policy — can only be aimed at one goal. 

The second is that a central bank can only target a nominal goal of some kind. 

The third is that inflation is a comprehensible and politically acceptable aim.

There are at least four strong objections to targeting asset prices.

It is possible that an exceptional crisis, such as the pandemic, will generate policy mistakes, including unexpectedly high inflation. Andy Haldane, the Bank of England’s chief economist, has stressed just this risk in a thought-provoking recent speech.

Martin Wolf FT 1 March 2021


Andy Haldane recent speech.


Inflation targeting has been successful because it managed to anchor expectations — until it did not.


 Did inflation targeting fail?  

Martin Wolf, Financial Times, May 5 2009


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