New Zealand introduced the first modern inflation-targeting regime in 1990. The policy made a specified inflation objective central to monetary policy and gave the Reserve Bank of New Zealand a clear framework for pursuing price stability.
The approach emerged after New Zealand’s economic reforms of the 1980s. The government and central bank agreed on a measurable inflation goal, improving transparency and making monetary policy easier for the public and financial markets to evaluate.
Inflation targeting does not mean prices must remain permanently unchanged. It generally means that policymakers aim to keep the inflation rate near a stated target over time. The framework can include flexibility for temporary shocks and unusually severe economic conditions.
Canada, the United Kingdom, Sweden, and many other economies later adopted similar systems. New Zealand is therefore remembered as the pioneer, although the precise design and target range have changed over the decades.