What was the inflation rate targeting introduced to achieve?

Inflation rate targeting is primarily introduced to control inflationary pressures. This monetary policy strategy aims to maintain a specific inflation rate, which central banks communicate clearly to the public. By targeting inflation, central banks can create a stable economic environment, where expectations for future inflation are anchored. This predictability helps individuals and businesses make informed decisions regarding savings, investments, and spending.

When inflation is kept within a target range, it prevents extreme price fluctuations that can disrupt the economy. A controlled inflation rate can foster economic growth while mitigating the risks associated with deflation or hyperinflation. Thus, controlling inflationary pressures is essential for maintaining economic stability and fostering sustainable economic growth.