When a central bank adopts inflation targeting, what is the primary goal of this monetary policy approach?

When a central bank adopts inflation targeting, its main goal is to keep inflation close to a specific, low, and predictable rate, such as 2 %. By announcing a target, the bank signals to businesses, consumers, and investors what to expect, which helps keep prices stable over time. This stability makes it easier for people to plan spending, saving, and borrowing, because they can trust that prices won’t suddenly rise. For example, if the target is 2 %, the bank may raise or lower interest rates to keep inflation around that level, preventing runaway price increases. This approach keeps the economy’s cost of living predictable and supports sustainable growth.