In their efforts to maintain low inflation, policymakers currently pay relatively little attention to the growth rate of the money supply. Yet many studies have found a close relationship between money growth and inflation, at least in the long run.
Inflation is always and everywhere a monetary phenomenon.
While guarding against rising inflation is one of the Federal Reserve's primary objectives, the Fed has found the short-run relationship between money growth and inflation too unreliable for money growth to merit much attention. At the same time, many studies have found a strong relationship between long-run averages of money growth and inflation. In fact, some economists have concluded from this evidence that the problem of controlling inflation has been successfully solved. There are two keys to reconciling findings of a close long-run relationship between money growth and inflation and policymakers' relative lack of interest in money growth rates. First, most studies that report a close connection in the long run use data for many countries, and it is sometimes noted that the finding appears to rely heavily on the presence of countries with high rates of money growth and inflation.