A target focused on short-term interest rates makes sense when this is the main policy variable, but if short-term rates are persistently pushed towards the lower bound, monetary policy has to focus on a wider constellation of rates across different maturities and asset classes. What then is its target?
Central bankers currently offer quantity targets in these cases – a volume of assets to be bought per month – but price targets are only given in general terms, for instance “flattening the yield curve”. This is appropriate so long as balance sheet policies are temporary.