Economic Quarterly

2004

 

Summer 2004

How Do Central Banks Control Inflation?

Robert L. Hetzel

An intellectual consensus over how central banks control inflation has not accompanied the broad public consensus that central banks should control inflation. Because of their monopoly over monetary base creation, there has long been a tradition associating the control of inflation with the control of money creation. This paper provides a monetary control characterization of Federal Reserve monetary policy procedures.

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