Fighting Inflation Promotes Growth

As growth slows around the world, fighting inflation appears to be going out of fashion. Nowadays, any number of politicians, businessmen, and even a few economists in Asia and Latin America object to central banks targeting a low level of inflation as their primary objective. They look at the actions of America’s Federal Reserve Board in the 1990s and argue that every central bank should focus on promoting growth. But viewing growth as something distinct from keeping inflation in check evidences a basic confusion, for low inflation promotes stability in the financial sector, and the combination of the two promotes growth.