The ability to control inflation expectations is most closely related to a central bank's:

Question

Quizplus · Accepted Answer

Credibility is the degree to which a central bank is trusted to do what it promises, namely, to keep inflation under control. The more credible a central bank, the more likely it is that inflation expectations will remain anchored, even if a temporary shock causes the actual inflation rate to deviate from the target. Transparency, accountability, and willingness to communicate are all important for central bank effectiveness, but they are not as closely related to the ability to control inflation expectations as credibility.

The Ability to Control Inflation Expectations Is Most Closely Related