1. 6 th Norges Bank Monetary Policy Conference Inflation targeting twenty years on Inflation targeting, asset prices and financial stability Christopher Allsopp New College, Oxford Oxford Institute for Energy Studies

2. Outline Introduction: setting the scene –What is inflation targeting and why was it a vast improvement –Key problem: nominal anchor and stabilisation –Regime change by design –Assignment Monetary and other policies in the NCA –Role of fiscal policy –Financial regulation Does the framework need to change? –Could policy have been better (Taylor, 2009) –Imbalances –Leaning against the wind –Booms and busts Further development –Does IT contain the seeds of its on destruction? –A two part reaction function? –Crisis and its aftermath –International imbalances and the S-I balance Conclusions

3. Setting the scene Hubris followed by nemesis? Does IT framework need to change? –Leaning against the wind? –Radical change? –Don’t blame IT System failure –Assignment –Policy design –Coordination

4. What is inflation targeting and why was it a vast improvement Key problem: nominal anchor and stabilisation –Pragmatic choice of institutional set up Regime change by design –Consensus –Role of theory ‘rule-like’ (Taylor): ‘Predictable’ (Woodford, 2003) Instruments What accounts for success? –Clear assignment –Simple and restricted mandate –What IT does not do. Fiscal and regulatory policy Pressure towards more instruments, more responsibilities, more objectives?

5. Does the framework need to change? Could policy have been better (Taylor, 2009) Imbalances Leaning against the wind Booms and busts

6. Further development Does IT contain the seeds of its on destruction? A two part reaction function? Crisis and its aftermath International imbalances and the S-I balance Conclusions

7. Nominal anchor and stabilisation Assignment Costs of adding new responsibilities The crisis. The blame game Low interest rates and global imbalances