Interview: Lars Svensson

Why do you favour inflation targetting? What distinguishes it from other frameworks of monetary-policy making?

The most obvious characteristic of inflation targetting is an explicit numerical inflation target. There is also a logical and efficient decision process, which I have called forecast targetting. The central bank makes forecasts of inflation and other variables, such as the output gap, and then chooses the interest rate so that these forecasts "look good", that is they are consistent w