Inflation targeting is a powerful and effective policy tool because it means monitoring so many economic variables: exchange rate, interest rate, labour policies, wage rates, trade, international shocks, fiscal policy, among others. And at the end of the day, all of these factors affect inflation, and more importantly they affect purchasing power, incomes, standard of living, poverty, and inequality. Ultimately, this is a policy mechanism to improve the lives of people, yielding better social outcomes and higher standards of living.
