Do currencies have inflation targets, or do countries have inflation targets?

**On Inflation Targets**

I fail to see a true dichotomy, because supposedly you wouldn’t have any sane country attempt to run two monetary authorities and two currencies in parallel. Inflation targets are set by monetary authorities, so the relevant unit is the central bank and the jurisdiction over which it has control.

We do have multiple countries running a common currency though, thinking of the Eurozone, and in that case the ECB targets a common inflation rate. Interest rates are actually quite a blunt tool, so in principle you can’t have say Cyprus and Portugal targeting different inflation rates while using the same currency and relying on the same base rate. This is as much of a political constraint as it is a mechanical one, because a single policy rate, a common transmission mechanism, and integrated capital markets will force convergence through arbitrage.

Divorcing the ECB from its “unilateral” mandate to set a common base rate through a common transmission mechanism would just create huge arbitrage opportunities. If one member state ran looser conditions somehow, then higher expected returns would attract capital inflows, expanding credit and raising prices. Similarly tighter conditions would cause outflows, contracting credit and decreasing demand. And these flows would continue until financial conditions and inflationary pressures realign with the common monetary stance.

**On Speculation**

Speculation affects the exchange rate. Inflation only responds through [exchange rate pass-through into import prices and expectations](https://thedocs.worldbank.org/en/doc/461221541081214468-0050022018/original/InflationChapter5.pdf). A fixed exchange rate regime suppresses exchange rate volatility usually through capital controls. [This comes at the cost of monetary autonomy](https://en.wikipedia.org/wiki/Impossible_trinity). This doesn’t necessarily mean however that successfully defending a peg comes with the freebie of avoiding inflationary pressures in principle. These regimes just relocate the adjustment from the exchange rate to their reserves and their domestic liquidity conditions. Again, results on the size and speed of the pass-through are heterogeneous.

**On Bitcoin**

There’s no institution attempting to hit anything, so there’s nothing to deduce.

Bitcoin has a predetermined issuance path and there exists no feedback mechanism to respond to prices and changing macro conditions. You can compute its supply growth rate but that’s basically it.

**On Other Tools**

Governments don’t have direct instruments in the same sense as their central banks. “Price stability” is the central bank’s mandate, and the best thing a government can do is avoid undermining the central bank’s job, rather than try to affect inflation itself.