An inflation target range is set by government after consultation with the Bank. The commitment is to pursue a continuous target of 3 to 6 per cent for headline CPI inflation. The Bank conducts monetary policy within a flexible inflation-targeting framework that allows for inflation to be temporarily outside the target range as a result of mainly supply shocks.
The Monetary Policy Committee (MPC) takes into account the appropriate medium-term time horizon for inflation to return to within the target range, considering the lags between policy  4  BIS central bankers’ speeches  adjustments and economic effects. This provides for interest rate smoothing over the cycle and makes growth more sustained and consistent.