In my view, the evidence does not support the idea that a change to our inflation target would deliver better economic outcomes than achieved by our current flexible inflation target. Some alternative frameworks would also be more difficult to implement and/or be harder to explain to the community. But it is important that we regularly examine the arguments.
If financial stability is so crucial to our economic well-being, then how can it be maintained? In a nutshell, it’s the framework for the financial system that counts. A suitable framework for financial stability boils down to sound institutions and a proper set of incentives.