Bank for International Settlements research maps 35 years of inflation targeting evolution toward stricter targets and broader flexibility

The Bank for International Settlements published a BIS Quarterly Review study that builds a new database of changes to inflation targeting frameworks at 26 central banks since 1990 and documents how “flexibility” in these regimes has evolved. It finds that while numerical inflation targets have generally become more tightly specified, frameworks have simultaneously shifted toward longer or less prescriptive horizons for achieving the target and greater formal weight on other objectives, particularly employment or output. The study constructs de jure indicators from official objectives and strategy documents, separating four dimensions of flexibility: the numerical target, the target horizon, real economy objectives, and financial stability objectives. Trends are reported as more pronounced in advanced economies than in emerging market economies, widening differences between the two groups. As of end-2024, advanced economies are characterised by stricter numerical target specifications paired with qualitative horizons, higher weight on real economy considerations, and a lower role for financial stability in monetary policy frameworks, often limited to strategy “clauses” rather than formal objectives. The indicators underlying the analysis are being made available on the BIS website, and the paper notes that forthcoming monetary policy framework reviews, including at the Federal Reserve and the European Central Bank in 2025, may shape the next round of framework adjustments.