The 1-percentage-point range around the target reflects the unconditional variance of the inflation process. 2 The 18- to 24-month time horizon reflects the lagged response to monetary policy action. 3 This inflexibility has significant value. It provides clarity of objectives and holds central bankers accountable.
When policy lacks credibility, it can be beneficial to have simple inflexible elements in the framework because they demonstrate the policy-makers' commitment to that policy.