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Definition of 'Price Level Targeting'
A monetary policy goal of keeping overall price levels stable, or meeting a pre-determined price level target. The price level used as a barometer is the Consumer Price Index (CPI), or some similarly broad measure of cost inputs. A central bank or monetary authority operating under a price level targeting system raises or lowers interest rates in order to keep the index level consistent from year to year.
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Investopedia explains 'Price Level Targeting'
Price level targeting is similar to inflation targeting in that both establish targets for a price index like the CPI. However, where inflation targeting only looks forward (i.e., a 2% inflation target per year), price level targeting actually takes past years into account when conducting open market operations. So, if the price level rose by 2% in the previous year (from a theoretical base of 100 to 102), the price level would have to drop the next year in order to bring the price level back down to the 100 target level. This could mean more forceful action needs to be taken than would be required if inflation targeting were used.
Price level targeting is generally considered a risky policy stance, and one not used by any of the world's advanced economies. It is believed to bring more variability in inflation and employment in the short run compared to inflation targeting Most economies feel that a small amount of annual inflation is actually a good thing, up to about 2% per year.
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Search results for 'Price Level Targeting'
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... Instead of the volatility coming from price swings, the volatility would be based
on the ... Make sure to decide on the type of profits you are targeting and the ...
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... can indicate to traders that a currency they are targeting should be ... principles to
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... A premium of, say, 10% above the market price seems within the bounds of
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... EST when price approached the 1.7410 level, which is 30 points, or 50% of our risk.
Next, we moved our stop to breakeven and held the position, targeting the ...
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... The Fed should lower rates when inflation is below the target level or when ... To properly
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... on a particular formula before the generic drugs swoop in and hammer down the price. ...
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... upward bounce in a company's stock price that typically ... He took an entry level
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