If forecasting inflation is difficult, even forward-looking inflation targeting central banks may respond to inflationary shocks too late to ward off inflation. Although there are several ways to forecast inflation, none may be that reliable. On one side, many analysts use econometric models, but these may have intrinsic problems in periods of significant structural shifts.
This would give a firm signal to investors and consumers, thereby supporting confidence and contributing to a recovery. While it may be perceived as more difficult to advance in these areas in an environment of weaker economic activity, the need to properly address rigidities should be much more obvious now than at times of buoyant growth.