Question 2: Should central banks persist with pure inflation targeting? 14. The answer before the crisis was an increasingly confident “yes”. 15. The years before the crisis saw a powerful intellectual consensus building around inflation targetting.
A growing number of central banks, starting with New Zealand in the late 1980s and currently numbering over twenty, embraced the principle of gearing monetary policy almost exclusively to stabilizing inflation. Even where central banks did not target a precise inflation rate, their policy objectives were informed, if not dominated, by price stability. This approach seemed successful.