Brazil Needs to Abandon Inflation Targeting and Yield to Fiscal Dominance by Monica de Bolle published by PIIE (9/2015).
What happens when efforts to combat inflation collide with government deficits so large that they force the central bank to buy up debt, print money, and thereby drive up inflation? Economists describe this as a collision between inflation targeting and fiscal dominance. Some studies (Kumhof et al. 2008)1 have focused on such cses as examples of a reversal of the traditional roles of monetary and fiscal policies: Central banks are forced to reduce rates when inflation rises, the opposite of their accustomed role, in order to guarantee the stability and solvency of debts and deficits, whereas fiscal policy remains stimulative when it should be reducing deficits to combat inflation.
