Inflation Targeting

It is widely recognized that monetary policy in a country should focus mainly on the pursuit of price stability. However, the way to achieve this goal most effectively is not clear. While the debate remains unresolved, more and more countries are adopting inflation targets as a framework for monetary policy. (2002 Dr. E J van der Merwe) The subject of this inflation target is a theme that instantly gives different opinions to different people. Many people believe that low inflation should be the main goal of monetary policy, but other people (such as union activists) should have a higher growth rate to stimulate employment should be the main focus I believe.

In recent years, more and more developed and developing countries have adopted inflation target as currency system. It is usually and preferably associated with a flexible exchange rate system. Inflation target is responsible for setting central bank's inflation target and achieving central bank's goal. In order to enhance accountability, reliability and efficiency, the central bank of inflation targeting systems usually seek transparency of business, generally explain decisions and in most cases issue periodic inflation reports.

Central banks play an important role in the management of inflation and interest rates. To curb inflation, many central banks have adopted inflation targeting. The inflation target system was first adopted in New Zealand in 1990, but has been widely accepted in many developing countries and developed countries due to the ability to maintain economic stability in the past 15 years. 4. Transparency and accountability - It is important to communicate with financial markets and the public through such systems. Post-conference press releases include conference proceedings and announcement of inflation reports to enable effective communication. If the central bank maintains transparency, accountability will be strengthened. If the comparison of inflation and targets shows a violation of the goal, the central bank must publicly explain it in contrast to the practices that the bank had hired so far (Bofinger, 2001) .

Nash wrote that by discussing the inflation target, central bank officials revealed the possibility of basically controlling inflation by controlling money supply. In the calculation, the central bank uses the living expenses index. It is made up of the domestic commodity price of a specific region of the country. Nash introduced the concept called Industrial Consumer Price Index (ICPI). This provides an international standard for comparing products by expressions containing different price products in different locations.