On the other hand, it could, in principle, constrain monetary policy ﬂexibility. I think ﬂexibility is important. Let’s be realistic: monetary policy cannot control inﬂation right down to the decimal point, let alone in a certain month or quarter. But ﬂexibility could also be achieved through design features other than a target band.
In particular, the existing medium-term orientation provides a high degree of ﬂexibility. It also takes account of the fact that monetary policy decisions achieve their full effect only with a time lag that can vary. Monetary policymakers should be able to wait if there are good reasons to do so, and not react hastily to every change in the data.