Effective counteraction to the upward price dynamics in the national economy is a prerequisite for ensuring sustainable economic growth and improving the welfare of households. In modern conditions, the most common form of monetary policy aimed at regulating price dynamics is inflation targeting. The main instrument of this policy is the short - term interest rate of the Central Bank. But restraining the price dynamics by increasing the interest rate leads to a fall in credit activity in the economy and predetermines the decline in economic growth. The purpose of the article is to develop tools of monetary policy, which provides a reduction in price dynamics in the national economy, but does not have a negative impact on the pace of economic development. The main result of this article is the conclusion that the increase in the short-term interest rate of the Central Bank in order to contain inflation leads to a slowdown in economic development. Therefore, the reduction of price dynamics should be based on the formation of rational expectations of economic entities regarding price dynamics on the basis of their information about the full range of measures that can be applied by the Central Bank in the current macroeconomic conditions to restrain price growth. The analysis of conceptual and practical aspects of inflation targeting is of interest to macroeconomic policy makers, financial analysts, private and institutional investors.
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