The inflation of prices and interest rates over the past four years has resulted from excessive total demand. Spending growth has averaged 7.7 per cent per year since 1965, while the capacity of the economy to produce has been growing at an estimated 4 percent rate. The Federal budget changes in June 1968 were designed to slow total spending. Late in the year a policy of monetary restraint was adopted. Since about mid-January, the growth rates of several strategic monetary variables have moderated, but there is no firm evidence that the rate of growth of total spending has decelerated. If the inflationary trend of spending is to be checked, the recently observed slowing of growth in Federal Reserve credit, member bank reserves, the monetary base, and the money supply must be sustained.