Inflation is regarded as costly because it erodes people’s savings and distorts price signals. And there are unquestionably instances when it has brought an economy to its knees. During Weimar Germany’s period of hyperinflation in the 1920s people’s savings evaporated, eliminating the middle class and paving the way for the rise of fascism. Inflation also spiralled out of control in Zimbabwe under Robert Mugabe. How can the central banks respond to inflations ?

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