Inflation Targeting

Inflation Targeting is an economic policy, which used by central banks for maintaining prices at a certain level or within a specific range. It is a central banking policy of a country estimates and makes public a projected or “target” inflation rate and then attempts to steer actual inflation toward the target through the use of interest rate changes and other monetary tools. Inflation targeting policy may also have established steps that are to be taken depending on how much the actual inflation rate varies from the targeted level, such as cutting lending rates or adding liquidity to the economy. It does not have a formal definition and is practised in different ways around the world.