quality:correction
Historical approaches to inflation control

Historically, central banks and governments have followed various policies to achieve low inflation, employing various nominal anchors. Before World War I, the gold standard was prevalent, but was eventually found to be detrimental to economic stability and employment, not least during the Great Depression in the 1930s. For the first decades after World War II, the Bretton Woods system initiated a fixed exchange rate system for most developed countries, tying their currencies to the US dollar, which again was directly convertible to gold. The system disintegrated in the 1970s, however, after which the major currencies started floating against each other. During the 1970s many central banks turned to a money supply target recommended by Milton Friedman and other monetarists, aiming for a stable growth rate of money to control inflation. However, it was found to be impractical because of the unstable relationship between monetary aggregates and other macroeconomic variables, and was eventually abandoned by all major economies. In 1990, New Zealand as the first country ever adopted an official inflation target as the basis of its monetary policy, continually adjusting interest rates to steer the country's inflation rate towards its official target. The strategy was generally considered to work well, and central banks in most developed countries have over the years adapted a similar strategy. As of 2023, the central banks of all G7 member countries can be said to follow an inflation target, including the European Central Bank and the Federal Reserve, who have adopted the main elements of inflation targeting without officially calling themselves inflation targeters. In emerging countries fixed exchange rate regimes are still the most common monetary policy.