This choice reflects a trade-off – a narrower band may be interpreted as indicating a stronger commitment to the inflation target, but frequent breaches could undermine credibility. A fixed point target is much more difficult to hit than a band.
Emerging-market countries have resumed robust growth. But in many of the advanced economies, notably the United States and Europe, economic growth has been sluggish, as households, firms and financial institutions continue to repair the damage to their balance sheets. As I will discuss later, this two-speed recovery creates a new configuration of risk in the global financial system.