Some Issues in Inflation Targeting

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 12 January 1998

Working Paper No. 74
By Andrew G Haldane

This paper discusses some of the operational issues relevant to the implementation of an inflation-targeting regime. In particular it focuses on: whether inflation targeting is ‘new’; whether it is potentially destabilising, for example to output; and whether it requires too much knowledge on the part of the authorities. The paper argues that none of these propositions appears in general to be correct. 

It goes on to discuss the use of inflation forecasts in general, and inflation probability distributions in particular, in the context of inflation targeting in the United Kingdom. It also discusses the important role greater transparency plays among inflation targeters and discusses some evidence on this. Finally, a preliminary evaluation of inflation targeters’ performance to date is given.

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