Which country became the first to adopt formal inflation targeting in 1990?

New Zealand became the first country to adopt formal inflation targeting in 1990. The policy framework was introduced after reforms that gave the Reserve Bank of New Zealand a clear price-stability objective.

The framework linked the central bank’s policy performance to an announced inflation goal rather than to a fixed exchange rate or a monetary-growth target. The government and the central bank initially set the target through a Policy Targets Agreement. The original target range was 0% to 2% annual inflation.

Inflation targeting does not mean prices remain unchanged. It means policymakers publicly state a desired inflation rate or range and adjust interest rates and other tools when inflation is expected to move away from it.

Canada adopted inflation targeting in 1991, followed by the United Kingdom in 1992. Many other central banks later used similar frameworks, including the Reserve Bank of Australia and, much later, the U.S. Federal Reserve.