Inflation targets and the benefits of an explicit tolerance band

Research output: Other contributionWeb publication/Blog post

Abstract

Inflation-targeting central banks commonly fail to hit their official inflation targets, so targets are combined with a tolerance band which is either implicit or explicit. Taking the Swedish Riksbank as an example, this column argues that adopting an explicit tolerance band would better communicate to the public the central bank’s lack of full control over the rate of inflation and thus foster public confidence in monetary policy, and it would also increase the central bank’s ability to stabilise the economy. The width of the band can be derived from the historical inflation outcome.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • central banks, inflation, inflation targeting, monetary policy, EU, eurozone, price stability
Original languageEnglish
Short descriptionArticle
Media of outputVOX CEPR Policy Portal
Publishervoxeu.org
Publication statusPublished - 2017 May 8
Publication categoryResearch
Peer-reviewedNo