In practice, inflation targeting is better considered as operating with constrained discretion rather than according to a policy rule because central banks with inflation targets typically:
A) are not allowed to adjust the target in the event of shocks.
B) set the inflation target as a range rather than as a particular number.
C) are not held accountable for achieving their target.
D) must achieve their target regardless of economic conditions.

Question

Quizplus · Accepted Answer

Central banks with inflation targets typically set the inflation target as a range rather than as a particular number, which means that they have some discretion in their decision-making process. However, this discretion is constrained by the target range, which helps to guide their policy actions. Therefore, inflation targeting is better considered as operating with constrained discretion rather than according to a strict policy rule.

In Practice, Inflation Targeting Is Better Considered as Operating with Constrained