Inflation targeting remains the dominant monetary-policy framework, but persistent deviations from the 2% objective are raising questions about how central banks should adapt without undermining credibility.
- Inflation targeting has provided a clear anchor for markets since its adoption in the 1990s, but the 2% objective itself has limited empirical justification.
- Measuring persistent inflation has become harder as services and technology account for a larger share of consumption, while recent price shocks have complicated policymakers’ reaction functions.
- With inflation still above target but expectations anchored, central banks face a difficult balance between restoring credibility, supporting growth and resisting political pressure on monetary policy.
Explore the full commentary for the implications of a potential recalibration of monetary-policy frameworks.
Continue reading this article?
Register for free and get access to Investment Officer International:
- Exclusive for professional investors
- Cancel anytime
- Unlimited access: web, app and newsletters
Registration takes less than 1 minute.
No payment details required
Register for free and get access to Investment Officer Luxembourg:
- Exclusive for professional investors
- Cancel anytime
- Unlimited access: web, app and newsletters
Registration takes less than 1 minute.
No payment details required
