Riksbank highlights complexity in choice of target

Sveriges Riksbank
Sveriges Riksbank
David Lundberg

Changing to a new inflation target variable could bring benefits for monetary policy, but there are many pros and cons, according to a report by Sveriges Riksbank, published today (September 14).

The study highlights how although the central bank's target variable is currently CPI, in practice the central bank also takes account of CPIF inflation, which treats interest rates as fixed. Because interest costs factor into the CPI, a rate hike can actually raise prices in the short term.


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