Before the widespread adoption of modern inflation targeting, central banks managed monetary stability by targeting specific growth rates within the aggregate money supply, a strategy known as Monetary Targeting. [1, 2]
Managing the Money Aggregates
Under this strategy, the policy committee establishes explicit growth targets for internal indicators like M1 (currency in circulation plus demand deposits) or M2 (M1 plus savings accounts and short-term certificates of deposit). [1]
  Targeting Strategy |   Primary Policy Target Matrix   |   Core Operational Risk Focus
---------------------+----------------------------------+---------------------------------------
  Monetary Targeting | Aggregate Money Supply (M1/M2)   | High vulnerability to velocity shifts
  Inflation Targeting| Consumer Price Index (CPI/HICP)  | Demands active communication tools

This strategy relies on a stable relationship between money supply growth and overall inflation. As financial innovation and digital banking channels emerged in the 1980s, the velocity of money became highly unpredictable, weakening this link and forcing central banks to shift to alternative strategies. [1, 2]
 
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