Recent Evidence on the Resiliency of Flexible Inflation Targeting

This paper assesses the resilience of flexible inflation targeting in the presence of large and persistent supply shocks. Evidence from Canada’s post pandemic experience, new macroeconomic experiments, and policy changes at the Reserve Bank of New Zealand shows that flexible inflation targeting remains a robust framework provided that credibility is preserved. Timely policy action and clear communication are critical for anchoring inflation expectations and sustaining policy flexibility.