For years, central banks across the world worried about inflation getting too high. In the past few years they have faced an even more intractable challenge: reviving inflation in an postcrisis era of low growth and flat price levels.

On Wednesday morning the Bank of Japan, which has been fighting deflationary pressures on and off for years, announced a new approach. It wants to overshoot its 2 per cent inflation target, as opposed to just getting inflation up to that level. This is designed to change consumers and businesses expectations of the future rate of inflation, which in turn the central bank hopes will spur price rises.

The bank also announced a change to the way it would operate in financial markets. In future it will attempt to cap 10-year bond interest rates, holding them at zero per cent. This means the bank will step in to the market and buy bonds when rates threaten to go higher.

However, it will has signalled that it will allow even longer term interest rates to rise, which will be welcomed by banks and investors as a way to get return on their spare cash.

Jump-start inflation

Bank governor Haruhiko Kuroda is trying, like his counterparts across the world, to jump-start inflation, in part by surprising investors and the public. But he will face scepticism. The central bank has not cut interest rates further into negative territory – its key rate is already at -0.1 per cent – though it has not ruled out doing so in future.

Nor is the bank increasing the overall amount of money it pumps into the economy via bond purchases each month, the so-called quantitative easing.

Instead, the central bank has attempted less traditional manoeuvres to change investor and consumer expectations, and thus their behaviour. But the question must be: what is the point of raising your inflation target when annual prices are falling slightly, meaning the +2 per cent target is so far away to be almost meaningless.

The markets are working out what it means, but the underlying theme is one repeated across the developed world. Central banks have cut interest rates to historic lows and are pumping billions into economies, but in many cases growth and inflation remain on the floor.

The fear is that the banks are running out of bullets, and that governments are unable or unwilling to step in to help via budget policies.

Low US growth

Now all eyes turn to the US Federal Reserve Board, which was due to announce its interest rate decision on Wednesday evening.

In the United States, at least, there has been some economic growth, though it has slowed to an annual rate of just over 1 per cent. Inflation is also running just above the 1 per cent mark.

It is a reflection of the odd times we live in that there is now such a focus on whether the Fed will raise rates (the current target is between 0.25 and 0.5 per cent) by just another 0.25 per cent. In the past, base rates of 0.5 per cent would have been seen as inconceivably low.

While the Bank of Japan and the European Central Bank are battling to get any inflation at all going, the Fed demonstrates how difficult it is to get back to anything like normal business against the backdrop of postcrisis low growth rates. Four Fed interest rate increases were initially expected in 2016. Now there will be at most one, either now or – more likely, analysts believe – in December.

Life was lot simpler in the old days, when central banks hiked rates when inflation soared and cut them when it slowed.