1 Three versions of inflation targeting 5 2 Exchange rate fluctuations 6 3 Stabilising prices 9 4 Choosing an operational focus 10 5 Setting out the possible future path of policy 13 6 Concluding remark 15 References 16 List of charts Chart 1. Inflation, Interest Rates and the Real Exchange Rate in Australia 18 Chart 2. Inflation, Interest Rates and the Real Exchange Rate in Canada 19 Chart 3. Inflation, Interest Rates and the Real Exchange Rate in New Zealand 20