In an economy with a flexible inflation targeting framework, the central bank maintains a long-term inflation target of 4.5%. During a particular year, the actual inflation rate is measured at 6.0%. In this context, what is the primary function of the 4.5% target?
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In an economy with a flexible inflation targeting framework, the central bank maintains a long-term inflation target of 4.5%. During a particular year, the actual inflation rate is measured at 6.0%. In this context, what is the primary function of the 4.5% target?