Inflation Bias

The tendency for the economy to experience continuing inflation as a result of discretionary monetary policy that takes place because of the time inconsistency problem of monetary policy.

Because of the dangers of inflationary bias, several measures have been suggested to prevent it. It has been proposed that states should have conservative central bankers. It has even been suggested that states should create inflationary goals, and if this inflation rate is exceeded, there should be some form of punishment for the central banker.