COMPARISON OF INFLATION TARGETING1
Comparison of Inflation Targeting
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Introduction
This essay will be a compare and contrast between the inflation targeting of the United Kingdom, Canada and New Zealand. First, I will begin with the United Kingdom.
United Kingdom
The goal of the Bank of England is to deliver stability to the prices of the economy and to keep inflation as low as possible (Bank of England.co.uk, 2016). Currently the inflation targeting of the Bank of England stands at 2%. It is commonly known amongst many people that the United Kingdom is an extremely expensive place to live. Currently, one British pound sterling equals $1.22 in United States Dollars. The British pound sterling is higher in value than the United States Dollar by $.22. When you compare this to the Canadian market which will be discussed next, the British pound sterling is even more valuable at $1.60 Canadian Dollars. The British pound sterling is $.60 more valuable than the Canadian dollar. As well, when you compare this to the New Zealand dollar, the British pound sterling is more valuable. The New Zealand Dollar (NZD) is worth $1.72 when compared to one British pound sterling.
The money in the United Kingdom is powerful, however so are the prices in the country and the value of the goods and services which raises the inflation rate.
Canada
Much like the United Kingdom, Canada, which was a former colony of the United Kingdom, aims to deliver stability to the prices of the economy and to keep inflation as low as possible (Bank of Canada, 2016). The basis for calculating the inflation rate is done in a very similar fashion to that of the United Kingdom. The Consumer Price Index (CPI) is factored in as well as the Core Consumer Price Index (CPIX). Just like the United Kingdom, the Bank of Canada aims to keep the inflation rate at 2%, however to also stabilize inflation between a range of 1% to 3%.
New Zealand
According to the Reserve Bank of New Zealand (2016), inflation is constructed much as the United Kingdom mentioned before and Canada, as well mentioned before. What New Zealand and Canada have in common is that both of these countries were former colonies of the United Kingdom and are part of the Commonwealth countries in the world which are linked to the United Kingdom. The Reserve Bank of New Zealand (2016) does the target inflation much like Canada, aiming at 1% to 3% in order to stabilize the economy.
References
Bank of Canada. (2016). Inflation Control-Target. Ottawa: Canada. Retrieved from:
Bank of England. (2016). Monetary Policy Framework. London: United Kingdom. Retrieved
from:
Reserve Bank of New Zealand. (2016). Inflation. Auckland: New Zealand. Retrieved from: