Editing Inflation (section)

=== Historical approaches to inflation control ===

Historically, central banks and governments have followed various policies to achieve low inflation, employing various nominal anchors. Before [[World War I]], the [[gold standard]] was prevalent, but was eventually found to be detrimental to [[economic stability]] and employment, not least during the [[Great Depression]] in the 1930s.<ref name="Historical"/> For the first decades after [[World War II]], the [[Bretton Woods system]] initiated a [[fixed exchange rate system]] for most developed countries, tying their currencies to the US dollar, which again was directly convertible to gold.<ref>{{cite web |title=About the IMF: History: Cooperation and reconstruction (1944–1971) |url=https://www.imf.org/external/about/histcoop.htm |access-date=17 September 2023 |website=www.imf.org}}</ref> The system disintegrated in the 1970s, however, after which the major currencies started floating against each other.<ref>{{cite web |title=About the IMF: History: The end of the Bretton Woods System (1972–1981) |url=https://www.imf.org/external/about/histend.htm |access-date=17 September 2023 |website=www.imf.org}}</ref> During the 1970s many central banks turned to a [[money supply]] target recommended by [[Milton Friedman]] and other [[monetarist]]s, aiming for a stable growth rate of money to control inflation. However, it was found to be impractical because of the unstable relationship between monetary aggregates and other macroeconomic variables, and was eventually abandoned by all major economies.<ref name="Historical">{{cite web |title=Federal Reserve Board – Historical Approaches to Monetary Policy |url=https://www.federalreserve.gov/monetarypolicy/historical-approaches-to-monetary-policy.htm |website=Board of Governors of the Federal Reserve System |access-date=17 September 2023 |language=en |date=8 March 2018}}</ref> In 1990, New Zealand as the first country ever adopted an official [[inflation target]] as the basis of its monetary policy, continually adjusting interest rates to steer the country's inflation rate towards its official target. The strategy was generally considered to work well, and central banks in most [[developed countries]] have over the years adapted a similar strategy.<ref name=Holdingline>{{cite web |title=Inflation Targeting: Holding the Line |url=https://www.imf.org/external/pubs/ft/fandd/basics/72-inflation-targeting.htm |website=www.imf.org |access-date=17 September 2023}}</ref> As of 2023, the central banks of all [[G7]] member countries can be said to follow an inflation target, including the [[European Central Bank]] and the [[Federal Reserve]], who have adopted the main elements of inflation targeting without officially calling themselves inflation targeters.<ref name=Holdingline/> In emerging countries fixed exchange rate regimes are still the most common monetary policy.<ref name=IMF>{{cite book |last1=Department |first1=International Monetary Fund Monetary and Capital Markets |title=Annual Report on Exchange Arrangements and Exchange Restrictions 2022 |date=2023 |publisher=International Monetary Fund |isbn=979-8-4002-3526-9 |url=https://www.elibrary.imf.org/display/book/9798400235269/9798400235269.xml?code=imf.org |access-date=12 August 2023 |language=en }}</ref>