While this approach gives us some indications, the causal relationships may be unclear, and the different periods were subject to different shocks which may distort the picture. Nevertheless, the data does show that inflation targeting has been consistent with an average inflation rate lower than in the previous decade, and accompanied by lower volatility and lower nominal and real interest rates.
Similarly, growth outcomes have been more favourable, which undercuts the argument that is sometimes made that inflation targeting is inimical to growth. We have adopted a flexible inflation targeting approach, conscious of the trade-off between short-term inflation variability and output variability.