Inflation Targeting in Practice : Strategic and Operational Issues and Application to Emerging Market Economies

There is widespread and growing consensus that the single most important goal of monetary policy should be the pursuit of price stability. To reflect this an increasing number of central banks have been granted independence and charged with the exclusive objective of controlling inflation. In January 1999 the Central Bank of Brazil decided to adopt an explicit inflation targeting approach. To inform this process the Bank and the International Monetary Fund held a seminar in Rio de Janeiro on 3-5 May 1999, from which this publication arose. The seminar's purpose was to analyse the experience of countries that have been operating under an inflation targeting framework, and to identify and review the steps that countries like Brazil should consider in adopting such a framework, to enhance the chances of its success. Experts from 10 central banks joined with officials from the Central Bank of Brazil and the IMF for an in-depth examination of recent experience, including aspects of the design and operation of inflation targeting in both developed and emerging economies. This report brings together summaries of the presentations given at the seminar, and presents a concise guide to the theoretical considerations and practical aspects that are key in assessing the benefits and costs of adopting an inflation targeting monetary strategy.