The topic we have been asked to address is ‘Inflation targeting: where do we go from here?’. Based on the observation that inflation-targeting countries were not spared from the fall-out of the current financial crisis, a frequent reaction to questions of this type has recently been to argue that the inflation-targeting framework is fundamentally flawed and needs to be replaced (see, for example, Wolf 2009).

Although he does not subscribe to this view, are Jonung pointed out at the conference that, in a historical perspective, regime changes tend to happen as the result of crises, suggesting that inflation-targeting frameworks may come under pressure as a result of the financial crisis we are currently experiencing. For those of us who believe that targeting inflation is still the central role of monetary policy, the challenge is therefore to ensure that this pressure does not lead to abandoning the framework altogether but, rather, to improvements in its implementation.

Crises may lead to questions about the validity of the status quo, but they do not necessarily bring about regime change. To illustrate how they may in fact be taken as an opportunity to implement constructive reforms, I find it instructive to review how the monetary authorities in Hong Kong have dealt with crises affecting its currency board system.