How does inflation targeting work?

Question

Wikipedia is too general.

Answer 1

The central banks of many countries such as New zealand, Australia, Canada, England apart from U.S. from the 1990's became more transparent in the inflation tragetting by annnouncing the inflaction targets by proper means of communication. The Central Banks acted as the Inflation targeteers and took the money growth and inflation into consideration for expansion or contraction of money.
Ramachandran V.

Answer 2

Is when the central banks tells how much money they will put in circulation that is way above of what the market really is. So they say we're going to put an inflation of 2.5% this means they're going to print that much money and give it to the goverment for spending. This is really like a tax imposed on the people that uses such currency and in many cases, if not all, this is unlawful, like in USA, not to mention all the countries that their currencies are backed by dollars, USA goverment and central bank is unlawfully imposing this tax in the form of inflation to it's people and to the people of other countries that rely on the dollar. So even if you're not a citizen or resident of the USA there is a chance that you are still paying taxes to them. If a country is backing their currency with Dollar like Argentina or Mexico, then they're paying this tax too becuase each time inflation occurs in the USA it also occurs in all those countries, this means that purchasing power lose because the central banks are putting more money in circulation and suddenly all currency looses value because it is abundant and is greater than the real market is (real state, commodities, goods, services, etc.)

Answer 3

Inflation targeting is a "best guess" sort of approach. Instead of trageting the growth of the money supply as the end-goal (which Greenspan's rule focused on), the growth of the money supply is the means to the end of inflation targeting. Since inflation cannot be "set", a complex set of causal relationships are utilized to hit the mark.

It's not as precise as Greenspan's work, but may ultimately be more effective.

Answer 4

The central bank sets an inflation target (which may be stationary or moving). Then, if inflation is below target, the central bank expands money supply until the target is reached. If the inflation is above target, the central bank contracts money supply, again, until the target is reached.

Answer 5

he FED head SHOULD know! But, he sure doesn't ACT like it!!