The traditional inflation-targeting policies of central banks are proving inadequate in a fragmented global environment prone to supply-side disruptions. The effectiveness of monetary policy is now heavily reliant on market perception.

<p>The core assumptions underlying the decades-old inflation-targeting orthodoxy have proven to be unfit for a geopolitically fragmented world characterized by frequent supply-side disruptions. Under such conditions, central banks' traditional monetary policies are only as effective as markets believe them to be.</p>