Can the objectives of maintaining inflation at the target and stabilizing output growth around its potential level come into conflict under an inflation-targeting framework?

It depends. When inflation increases due to excess demand from households and companies, there is no conflict. Closing the output and inflation gaps relative to the target requires raising central bank interest rates (benchmark rates) to cool the economy. In this case, monetary policy is said to operate countercyclically. In contrast, when inflation rises due to supply shocks —for example, when food prices rise sharply due to climatic factors such as droughts or in production costs through significant increases in the exchange rate or wages— the central bank must raise its interest rates so inflation can converge back to the target, even if there is no excess demand in the economy. In such a situation, monetary policy might not be deemed as countercyclical.