Inflation Control and Monetary Policy Rules

If the 1990s turn out to be the decade in which a quarter-century of worldwide inflation comes to an end, that will be because policymakers have finally digested the message that inflation is a monetary phenomenon and a costly one at that. It will also be because institutional arrangements that permit price level behavior to become the main concern of central banks have been, or are in the process of being, put in place. Though details differ widely across countries, it is a fair generalization that in the past few years central banks have been granted (or have taken) increasing autonomy in the day-to-day conduct of monetary policy at the same time as they have become more single-minded about the control of inflation.