Domestic Economy
0

Simple Solution for Inflation Control

Simple Solution for Inflation Control
Simple Solution for Inflation Control

We have heard and read a lot about central banks increasing interest rates in the face of inflationary episodes as a preventive policy or to contain existing inflation. 
Why and how a hike in interest rates leads to a decline in inflation rate is a theoretical discussion that has a long history (perhaps more than 100 years); it has been discussed in detail in monetary economics. 
This writing is not about theoretical, academic arguments. However, it is important to know that introducing the short-term interest rate in the money market is currently the most effective policy used by central banks to curtail inflation. 

Premium

Subscribe to the Financial Tribune to continue reading this article or Log in to your account if you are already a subscriber.

Find out more about our subsciption plans here.

Add new comment

Financialtribune.com