An Alternative Measure of Inflation
Last Updated: 01/26/06
Controlling inflation is a primary goal of monetary policy. In order to control inflation, central bankers need to be able to measure and forecast inflation as best they can. Forecasting is particularly important, given the fact that monetary policy operates with “long and variable lags,” and therefore policymakers need to act well in advance of actual developments in inflation, on the basis of their forecasts.