Having said that, several countries have successfully introduced inflation targeting when their central banks were still in a position of ‘fiscal dominance’, at least where that is measured by the size of seigniorage income (Chile and the Czech Republic are good examples).
Moreover, distant one-year forward interest rates remain low, an indication that markets currently do not expect much change in the global balance of desired saving and investment or that they expect the effects of such a change to be offset by other developments. Accordingly, we are again reminded of the need to maintain appropriate humility in forecasting returns and asset prices.