Inflation targets and the benefits of an explicit tolerance band
Research output: Other contribution › Web publication/Blog post
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.
|Research areas and keywords||
Subject classification (UKÄ) – MANDATORY
|Media of output||VOX CEPR Policy Portal|
|Publication status||Published - 2017 May 8|