Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an intermediate target. Inflation forecast targeting simplifies both implementing and monitoring of monetary policy. The inflation forecast is actually an ideal intermediate target: it is most correlated with the goal, easier to control than the goal, more observable than the goal, and very transparent. Money growth targeting generally leads to higher inflation variability than inflation targeting. In the rare special cases when either money growth or the exchange rate is the best intermediate target, inflation forecast targeting automatically implies the relevant intermediate target.
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