Exchange Rate Models: Short-term Fluctuations

A major central bank of a developed country has recently adopted an inflation targeting strategy. As part of this strategy, the bank established a target inflation rate of 2% and informed the market that they would adjust interest rates accordingly to maintain this target. Meanwhile, the corresponding exchange rate of this country's currency against a trading partner's currency has been fluctuating significantly, causing concerns among exporters.

In an academic discussion on exchange rate models, some economists argue that currency valuation should be primarily influenced by interest rate differentials. Others suggest purchasing power parity (PPP) provides a more reliable framework for understanding long-term currency movements. Given these differing views, which model would most likely explain short-term exchange rate fluctuations better, particularly in light of the central bank's interventions?