The benefit of adopting an inflation-control target
i. is that the Reserve Bank's policy actions are clearly understood in financial markets.
ii. is that it provides an anchor for future expectations of inflation.
iii. is that Reserve Bank policy actions are hidden from financial markets.

Question

Quizplus · Accepted Answer

i. Adopting an inflation-control target helps financial markets understand the Reserve Bank's policy actions, as it signals the bank's commitment to maintaining inflation within a certain range. ii. It also provides an anchor for future inflation expectations, helping to stabilize the economy by ensuring that both businesses and consumers can make more informed decisions regarding spending, saving, and investment.

The Benefit of Adopting an Inflation-Control Target