Sterilized foreign exchange interventions under inflation targeting
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Date
2015
Journal Title
Journal ISSN
Volume Title
Publisher
Banco Central de Chile
Abstract
Description
Inflation targeting needs exchange rate flexibility. If the policy interest rate is geared to achieving the inflation target the central bank must be willing to accept the resulting exchange rate. Simply put if the central bank has both an inflation target and an exchange rate target the private sector will not know which will take precedence in cases where they conflict at most therefore the central bank should react to exchange rate movements only to the extent that they affect expected inflation.
Keywords
TIPO DE CAMBIO, INFLACIÓN, BANCOS CENTRALES