Our targeted inflation rate, set in consultation with government, is a range of inflation between 3 and 6% on an ongoing annual basis. In other words: we target a monthly, year-on-year inflation rate of not lower than 3% and not higher than 6%. In practice, we aim for inflation to come out near the middle of our target range, at around 4.5%.
This gives scope for variation and shocks to hit the economy. These shocks move inflation above and below 4.5% but, by the design of our framework, they do not necessarily require policy adjustments. This is the meaning of ‘flexible’ inflation targeting, and it allows us considerable leeway in looking through or past temporary shocks to the inflation rate.