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This paper focuses on the future of economic policies with regard to
inflation. The dominant approach to inflation over the past two decades or
so has been inflation targeting. The global environment of the decade circa
1995 to 2005 with the ?China effect? pushing down prices of manufactured
goods and with primary commodity prices being subdued was conducive to low
inflation. It is argued that inflation targeting has not been a great
success story and is unable to address inflation arising from global forces
or from struggles over the distribution of income. It is argued that a more
sophisticated analysis than that contained in the Phillips curve is
required. Further, and from our analysis, counter inflation policies should
include the achievement of an inflation barrier consistent with full
employment without inflationary pressures. This can be addressed by ensuring
that there is sufficient productive capacity to underpin full employment,
where sufficient is to be interpreted in terms of quantity, quality and
geographical distribution. Further, we argue that this should be
complemented by some form of incomes policy, to enable inflation to be
contained without resorting to demand deflation.