Finally, although one can find economic circumstances in which inflation targeting will work well, it is also possible to imagine circumstances in which even forward-looking, flexible inflation targeting may not work so well, some of these circumstances from the fairly recent past of the United States. Basic aspects of inflation targeting Describing an inflation targeting regime is straightforward.
A country or its central bank commits to controlling inflation, with an explicit target rate and usually a tolerance band around this target rate. Obvious price shocks such as indirect taxes, commodity prices, or interest rates themselves are usually excluded in the calculation of inflation targets.