At central banks around the world, forecasts have come to play an increasingly important role both in policy deliberations and in communications with the public. The most striking examples are the Bank of England, Sweden's Riksbank, Norway's Norges Bank, and the Reserve Bank of New Zealand, all of which conductpolicy on the basis of a procedure sometimes referred to as “inflation-forecast targeting” (Svensson, 1997, 1999). Under this approach, the central bank constructs quantitative projections of the economy's expected future evolution based on the way in which it intends to control short-term interest rates, and public discussion of those projections is a critical part of the way in which the bank justifies the conduct of policy to the public.
Paper first published in Journal of Economic Perspectives, Volume 21, Number 4, Fall 2007, pp. 3–24.
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Woodford, M. (2010). The Case for Forecast Targeting as a Monetary Policy Strategy. In: Wieland, V. (eds) The Science and Practice of Monetary Policy Today. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-02953-0_3
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