On Policy Rules for Price Stability

Over the 1980s and 1990s, monetary policy in most industrialized countries has focussed increasingly on achieving rates of inflation at or close to price stability. The result in the 1990s has been a remarkable convergence in these economies towards relatively low rates of inflation. In some countries, such as New Zealand, Canada, the United Kingdom, and Sweden the move towards price stability has been accompanied by the announcement of explicit inflation targets or target ranges.1 Other countries, such as Germany and Switzerland, have explicit medium-term inflation objectives; still others, such as Japan and the United States, have made price stability, albeit unquantified, a medium-term objective. It is evident that, to varying degrees, monetary policy in these countries is now aimed at keeping inflation low and relatively stable.