But even here the flexibility to be forward-looking and to pursue other goals is less than a commitment of the central bank to try to stabilize output or promote full employment. The exact importance of these other objectives remains in question, even for flexible and forward-looking inflation targeting regimes.
Other instances in which inflation targeting might not work so well are negative supply shocks, such as most economies experienced in the mid-1970s when oil prices exploded. In these times, inflation rises just as output falls.