November Monetary and Credit Policy Report
As high inflation persists following the pandemic, voices calling for central banks to present a concrete policy timeframe have emerged. In response, the Bank of Korea stated that specifying a period amid high uncertainty could undermine the central bank's credibility if inflation does not converge to the target within that timeframe.
On the 14th, the Bank of Korea released a report titled "Discussion on the Policy Timeframe of the Inflation Targeting System and the Status of Major Countries" in its Monetary and Credit Policy Report, stating, "As the drivers of inflation slowdown differ by country, discussions on the policy timeframe?the period required to bring inflation back to the target level?are being raised."
Recently, New Zealand has been considering measures to allow the central bank to focus solely on price stability by removing the employment stability mandate and specifying a concrete medium-term timeframe for achieving the inflation target.
The U.S. Federal Reserve (Fed) has expressed its intention to achieve the inflation target in the "long term," while the Bank of England specifies the policy timeframe as "at all times," though it refers to the medium term in its meeting minutes.
The European Central Bank (ECB) describes its policy timeframe as medium-term and flexible, explaining that appropriate policies responding to deviations from the inflation target vary depending on the cause, magnitude, and persistence of shocks.
The Norges Bank also uses the term medium-term, considering that the optimal policy timeframe may differ depending on the type of shock.
Meanwhile, the central banks of Canada (6?8 quarters), New Zealand (1?3 years), and Switzerland (3 years) all set their policy timeframes as medium term but provide additional information on the timeframe through their "monetary policy strategies" and other documents.
The central banks of Thailand and T?rkiye initially specified a policy timeframe when introducing the inflation targeting system but later revised it to omit a specific period as the system became established.
The Bank of Korea has been aiming for a medium-term target without specifying a concrete period since 2010. At the time of introducing the inflation targeting system in 1998, it set and evaluated annual inflation targets until 2003, then shifted to a medium-term inflation targeting system in 2004, setting a three-year target achievement period.
The Bank of Korea stated, "As high inflation has persisted for a considerable period after the pandemic, and voices calling for central banks to present a concrete policy timeframe have emerged, it is necessary to continue in-depth research on this issue and efforts to seek optimal communication methods in the future."
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