wage and price inflation and the output gap. We find that when the central bank's objective is defined solely in terms of … price inflation, it is welfare optimal to stabilise only those fluctuations in price inflation that are forecastable at … least five quarters ahead. On the other hand, when the central bank's objective involves both wage and price inflation …

-off between the variances of price and wage inflation and the output gap. This trade-off implies that it is desirable for the … monetary authority to respond to more than inflation, output and past interest rates when setting the current interest rate …. Indeed, the welfare optimal policy can be approximated with responses to both price and wage inflation and the past interest …

summarise central banks' recent research on the linkage between exchange rates and inflation, output, profits and the current …

Recent trends toward greater central bank independence and the adoption of formal inflation targeting by several …