The Goal of an Ideal Inflation Policy

C

Anticipated inflation, even at relatively high levels, is generally not problematic. Therefore an ideal inflation policy would attempt to keep inflation as predictable and as stable as possible. Of course, theideal inflation rate would be zero, but minimizing average inflation, with no attention paid to the variability, would not be helpful. In the U.S., for example, the Federal Reserve and the Treasury department are careful to broadcast the money supply, so that market participants can make as accurate an estimate of inflation as possible.