Explanation:
An effective inflation-targeting framework typically involves a clear, symmetric, and forward-looking medium-term inflation target. This target is set sufficiently above zero to prevent deflation risks while remaining low enough to maintain significant price stability. Options A and B are incorrect because the target is not set at or below zero, as this could undermine the framework's objectives.
The inflation target of an effective central bank is most likely:
A
Set at zero to mitigate the risk of deflation.
B
Maintained significantly below zero to uphold high credibility.
C
Established above zero to avoid deflation while ensuring price stability.
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