Advancing the frontiers of monetary policy

Inflation-forecast targeting is state of the art for monetary policy. This book explores first principles, including managing short-term policy trade-offs, outlines efficient operational procedures, and reviews the experiences of Canada, the Czech Republic, and India.

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How should a country implement inflation-forecast targeting for monetary policy? This book explores the basic principles and practices. A central theme is that managing expectations is essential for achieving the inflation target and for effectively managing short-term policy trade-offs. The book outlines efficient operational procedures, central bank communications, financial stability issues, and the importance of incorporating financial conditions in inflation-forcast targeting. It also reviews the experiences of Canada, the Czech Republic, India and the United States. The analysis argues for assertive policies and maximum transparency, especially when long-term expectations tilt towards high inflation or deflation.