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2006, No. 5
Posted 2006-02-03

The Long-Run Benefits of Sustained Low Inflation

Policymakers at the Federal Reserve wage preemptive wars against inflation; that is, they tend to tighten monetary policy during economic expansions before incoming data confirm an increased rate of inflation. Today, many market analysts believe the FOMC is nearing the end of its most recent preemptive strike. Hence, it seems worthwhile to review the benefits that flow from sustained low inflation.