How can the government control inflation?

Governments can use wage and price controls to fight inflation, but that can cause recession and job losses. Governments can also employ a contractionary monetary policy to fight inflation by reducing the money supply within an economy via decreased bond prices and increased interest rates.

What are the methods used to control inflation?

There are four basic strategies that central banks have used to control and reduce inflation:

• exchange-rate pegging;
• monetary targeting;
• inflation targeting; and.
• inflation reduction without an explicit nominal anchor, which, for want of a better name, might best be referred to as ‘just do it’.

How does South African government manage inflation in the country?

To protect the value of the rand, the SARB uses inflation targeting, which aims to maintain consumer price inflation between 3\% and 6\%. The value of the currency is therefore protected relative to domestic consumer prices. Monetary policy is implemented by setting a short-term policy rate – the repo rate.

Who controls inflation?

Inflation is generally controlled by the Central Bank and/or the government. The main policy used is monetary policy (changing interest rates).

How do central banks combat inflation?

The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.

How does the South African Reserve Bank control the economy?

In pursuit of its mandate and purpose, the Bank performs the following key functions: formulating and implementing monetary policy; promoting financial stability; regulating and supervising the banking and insurance industry through the Prudential Authority; issuing banknotes and coins; managing the official gold and …