6 Don Brash, who was the first Governor of the inflation-targeting era, once said of the origins of inflation targeting in New Zealand “I will simply note that history can be surprisingly confusing, even for those who were there” (Brash, 1998). Ref #7482042 v2.2  4  And why does credibility matter?
If policymakers are able to convince firms and workers that they will set policy to achieve the inflation target, this anchoring of inflation expectations makes it more likely that prices and wages will be set in a manner consistent with the target, even in the face of shocks to the economy. This naturally makes the target itself easier to achieve.