In fact, there is rather more to it, as the practice in the United Kingdom shows. The idea is that a public commitment to an inflation target, coupled with the maximum of transparency in describing the authorities’ forecasts and decision-making process, enables a discretionary approach to be applied with less risk that monetary policy decisions will be biased toward leniency.
If, in addition, the central bank is made fully independent to pursue a clearly-defined goal, political interference will be avoided. A growing list of countries have adopted the inflation targeting approach in recent years, including Canada, New Zealand, Australia, the United Kingdom, Sweden and Finland.