The central bank of the Republic of Astoria operates under an inflation-targeting framework, with a mandate to maintain price stability (targeting an annual consumer price index inflation rate of 2.0%). To achieve this economic policy objective, the central bank adjusts its main policy interest rate to manage aggregate demand and control inflationary pressures.
Table 1 shows the annual inflation rate and the central bank's policy interest rate in Astoria from 2013 to 2022.
Table 1: Inflation and policy interest rates in Astoria (2013–2022)
| Year | Annual Inflation Rate (CPI) (%) | Central Bank Policy Interest Rate (%) |
|---|---|---|
| 2013 | 1.8 | 1.00 |
| 2014 | 1.5 | 0.75 |
| 2015 | 0.5 | 0.50 |
| 2016 | 0.8 | 0.50 |
| 2017 | 2.1 | 1.00 |
| 2018 | 2.5 | 1.25 |
| 2019 | 1.9 | 1.00 |
| 2020 | 0.7 | 0.25 |
| 2021 | 3.2 | 0.75 |
| 2022 | 7.5 | 2.50 |
Source: Astoria Central Bank Statistical Bulletin
Refer to Table 1.
Describe the relationship between the annual inflation rate and the central bank policy interest rate in Astoria between 2013 and 2022.
