Core conclusion
Inflation stability is one of the core objectives of many central banks' monetary frameworks. At present, the United States, the euro zone and Japan all adopt the inflation targeting system, but the method and purpose are slightly different. This paper aims to sort out the changes in the role of inflation in the monetary framework of the Federal Reserve, the European Central Bank and the Central Bank of Japan, as well as the cooperation of corresponding monetary policy tools.
The United States: the evolution of dual goals of employment and inflation.
1) 1940s: fixed interest rate anchor in wartime, inflation was not taken into account.
2) 1950s-1960s: there was no clear monetary policy anchor, and the "headwind strategy" was chosen according to the circumstances to reduce economic stability
Qualitative. 3) 1970s: policy mistakes, external shocks and productivity decline made monetary policy ineffective, and the United States entered a period of stagflation.
4) late 1970s: money supply was the anchor to meet the anti inflation demand of the Federal Reserve.
5) early 1980s: behind the success of anti inflation is the economic recession and credit crisis, and the end of money supply anchor.
6) mid-1980s: with the interest rate of long-term treasury bonds as the anchor, inflation expectations decreased significantly.
7) late 1980s: the Fed's response to inflation was more systematic and transparent.
8) 1990s - before the financial crisis: discretionary choice under rule constraints, with both credibility and flexibility of monetary policy.
9) 20072011: maintain the effectiveness of monetary policy and adjust monetary policy tools and rules.
10) 20122019: continue to improve monetary rules and enhance policy transparency, and double anchor employment and inflation.
11) post epidemic: fine tuning of employment and inflation targets.
Eurozone: the representative economy of inflation targeting.
1) 19992008: the medium-term target is adjusted to maintain HICP "below but close to 2%", and the "double pillar" framework is used for cross checking and unified judgment of inflation risk.
2) 20092019: under the dual impact of the financial crisis and the European debt crisis, Europe is facing the risk of continuous deflation with weak supply and demand. Therefore, the central bank adopts unconventional monetary policy tools to calibrate inflation (expectation) that is too low.
3) after the epidemic: adopt the symmetrical inflation targeting system of "anchoring 2%", and the monetary policy framework also includes two factors: financial stability and climate change.
Japan: the inflation target is gradually clear.
1) 19521970: inflation is one of the many objectives of monetary policy.
2) 19711990: the first oil crisis triggered high inflation in Japan. During the second oil crisis, inflation gradually became the core target, and the Bank of Japan made efforts to resolve the inflationary pressure.
3) since 1991: the iteration of non-traditional monetary policy and inflation target have been gradually clarified. The CPI is set at less than 1% in the short term and less than 2% in the long term.
Risk tip: the understanding of monetary policies of various countries is not in place.
