Norway’s decision to lower its inflation target is the final example, but the northern state actually followed similar reactions from Sweden and Argentina, as well as the Eurozone. Even in New Zealand, the birthplace of target inflation, the central bank has expanded its focus on the employment.
But there is not one single right solution for regulators around the world. The rise in inflation targets has been discussed in an equally intensive manner in recent years as well as its reduction. And while some central banks recognize the need to revise their policies, others are stepping up their commitment to their current policies.
The Federal Reserve is struggling to meet its 2% inflation target over the past five years. Some of the Fed’s employees discussed the possibility of inflation being set in a range, not just a fixed value. Others have suggested starting to analyze current target inflation. However, it is clear that any change in the 2% target will attract the Congress attention. The Fed Chairman Jerome Powell talked on the topic last month and said that the current frame is working.
While European Central Bank officials are unconditionally behind their inflation target during the crisis that hit the 19 Eurozone countries over the last decade, they have given more time to reach it. The medium-term horizon, where inflation is projected moving close but below the 2% limit, was extended by between 3 and 5 years. The ECB is trying to protect its unprecedented monetary incentives. Mario Draghi at the last meeting of the central bank explained that the price pressure remains low and there are still no conclusive signs of a sustained upward trend, which is why it will take longer to buy assets and maintain record low interest rates.
The Bank of England is also flexible when it comes to reaching its 2% target. In recent years, there have been large deviations caused by factors such as the pound movements. Recently, the current policy horizon has been temporarily extended to provide support to the economy.
The country this month made its first policy change over the past 17 years, lowering its inflation target from 2.5% to 2%. This is a reasonable step in line with the objectives of other central banks and is reasonable in terms of the expected reduction in oil revenues in the economy.
Sweden’s central bank cut some of the enormous incentives it unleashed in the past three years after half a decade of inflation under the target. The regulator introduced a range of 1% to 3% for target inflation. The record stimulus over the past three years has supported GDP, and inflation has returned to levels close to 2% after six years of deflation.
The central bank, вхицх main mandate is to ensure price stability by targeting inflation, fails to meet its 2.5% target. Анд афтер фаилед,м тхере вере пропосал фор reducing it. Current levels of key interest rates have not changed since March 2015, the longest period to date in Polish history. Central Bank Governor believes interest rates for each are likely to remain at their current levels by 2020, as projections show that inflation will move closer to its target over the next two years.
Three decades after the creation of the concept of “target inflation” and its presentation to the world, New Zealand’s central bank expanded its focus to the labor market. The change was initiated at the initiative of the government. In addition, there is an idea for the Bank’s Management Board to join external experts to help shape the monetary policy of the country.
Central Bank Governor Haruhiko Kuroda has repeatedly been pressured to change the timeframe in which inflation is expected to be 2%. This has triggered a debate in two ways: according to some critics, the goal is too high, while, according to supporters, incentives will lead to higher prices index. The main task of the central bank in the country is to keep inflation and the financial system stable at the same time.
The Australian Central Bank has a mandate to maintain currency stability and full employment, and target inflation is between 2 and 3%. Low interest rates in Australia have improved business conditions and encouraged businesses to recruit and invest. However, the indebted households, due to weaker wage growth, have difficulty repaying their credits while consuming. According to bank manager, Philip Lowe, following the boom in new jobs this year, there are reasons to be optimistic about wage growth. The markets expect tightening of monetary policy no earlier than December 2018
The Bank of Canada reviews its policy every five years, following consultations with the government of the country. The next review will be in 2021. The bank is currently failing to meet its inflation target and is already exploring different ideas for revising its policy.
In Brazil, the country traditionally suffering high inflation, the recent softening of prices has allowed central bankers to cut target inflation for the next few years, while at the same time credit costs reach their lowest historical level. The target inflation (currently 4.5% target annual inflation) is down to 4.25% in 2019 and 4% in 2020. However, inflation has remained at 2.84% for the past 12 months.
In December, Argentina cut its inflation targets for the next two years, hoping that it would give the central bank more freedom to pursue its monetary policy in an attempt to support otherwise weak economic recovery. The target inflation in the country in 2018 is 15%. For comparison in February, inflation in the country was 25%.