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Is it time to inject some reality into inflation targeting?

Inflation continues to be boosted by external factors over which the Monetary Policy Committee (MPC) can exercise little influence. One way to give the MPC more scope to help the economy could be to move to a target for domestically-generated inflation. But measurement issues and the potentially adverse impact on expectations make this a risky option. A more flexible interpretation of the current target may be a better alternative.

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