2. Goal for inflation:
Many nations use an inflation goal as part of their monetary policy. People's inflation expectations will be reduced if they feel the inflation goal is credible, according to this concept. Countries have also given the Central Bank the freedom to decide on monetary policy on its own. To put it another way, it's argued that an unbiased Central Bank would be able to determine interest rates without political interference.
3. Fiscal Policy
It is possible to decrease expenditure, demand, and inflationary pressures by raising the rate of income tax. Government finances improve and demand in the economy is reduced as a result of this policy.
By lowering the rise of aggregate demand, these strategies decrease inflation. Reducing inflationary pressures by slowing the rise of AD may be done without generating recessions if the economy is growing quickly.
4. Wage Control:
A theoretical benefit of wage limits is that they might minimize inflationary pressures. But, other than the 1970s, it hasn't been used much.
The slowing of pay growth may be an effective way to control inflation if it is the root reason (e.g. strong unions negotiating for higher real wages). Cost-push inflation is lessened by slower wage growth, and demand-pull inflation is kept in check.
5. Policy on the supply side
Most of the time, inflation is caused mainly by businesses not being able to compete and costs going up. Supply-side strategies, however, might take a long time to implement and are unable to control inflation due to an increase in demand.
6. Cost-Push Inflation:
Increases in the cost of goods and services (such as the price of oil) may cause inflation and slow development. To regulate without slowing down economic development would be tough in this situation because of the worst of all worlds.
7. Rate Discount
When the Federal Reserve lends money to private banks and other financial institutions, it charges an interest rate called the discount rate. Those who make these short-term loans do so via a mechanism known as the discount window. Fed Board of Governors and each regional bank's board of directors decide the discount rate, which is the same across Reserve Banks, by unanimous consent.
Even while the primary goal of the discount window is to meet banks' short-term liquidity requirements and keep the financial system stable, the discount rate is just another interest rate that must be increased in order to curb inflation.