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Price Stability and Intermediate Targets for Monetary Policy

Authors 
Ildeberta Abreu
Vítor Gaspar
Publication Year 
1999
JEL Code 
E31 - Price Level; Inflation; Deflation
E52 - Monetary Policy (Targets, Instruments, and Effects)
E58 - Central Banks and Their Policies
Abstract 
Monetary policy strategy in Portugal has been presented in recent years as pursuing the final goal of price stability through an exchange rate stability target. This paper argues that a central bank committed to the goal of price stability - meaning low inflation in the medium/long run - can successfully control average inflation in the economy drawing up a strategy that involves an intermediate monetary target (exchange rate or money). Arguments in favour of the use of an intermediate monetary target in terms of communication strategy are briefly discussed.
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