Inflation is an objective economic phenomenon that cannot be avoided, however, it can and should be fought. Depreciation of money and an increase in the money supply is, in principle, a normal process, however, a sharp jump in inflation can cause irreparable violations in the economic system. That is why the state’s anti-inflationary policy is one of the most important instruments of economic regulation. We will talk about the types and methods of suppressing inflation in this article.
The anti-inflationary policy of the state includes a huge range of measures related to the suppression of the processes of depreciation of money. In essence, inflation is a decrease in the value of money due to a significant increase in the money supply in circulation. There are two main approaches to the selection and implementation of measures to reduce inflation: monetarists are adherents of the so-called monetary regulation, in which the state's anti-inflationary policy can be implemented in the following ways:
1) regulation of the so-called discount interest rate - that is, the interest rate at which the national bank lends money to commercial banks. Naturally, a change in the discount rate entails a similar change in commercial rates. Thus, by raising the discount rate, the central bank reduces the demand for money presented by commercial banks, and those, in turn, are forced to raise their rates, thereby reducing the population’s demand for money.
2) Regulation of compulsory reserve requirements - parts of the assets of commercial banks, which must be mandatory stored in the so-called correspondent account of the bank with the Central Bank. This method of regulation is similar to the regulation of the discount rate, however, it is somewhat less effective.
3) Operations with government securities - bonds, treasury bills and others - allow you to extract real money from circulation, replacing it with less liquid government obligations.
According to Keynesians, the anti-inflationary policy of the state should be implemented by eliminating the budget deficit, which, in turn, should be implemented by regulating household incomes, government spending and tax rates. This policy is called fiscal and involves the use of the following tools:
1) Reducing government spending on the maintenance of socially unprotected sections of the population — reduced payments of pensions, unemployment benefits, benefits, and so on;
2) An increase in tax rates, as a result of which the state budget receives more money, which is then put into circulation to a lesser extent. It should be noted that fiscal policy instruments should be used very carefully, as this causes a very severe negative reaction from the population.
Anti-inflationary policy in Russia is a combination of monetary and fiscal policies. The specifics of the Russian economy and the mentality of the population, which has only recently ceased to live in a planned economy, poses the government the need to create a unique set of measures to suppress inflation. One of the most interesting tricks by which the anti-inflationary policy of the Russian Federation is implemented is the creation of a stabilization fund, which, on the one hand, allows you to remove part of the money supply that is “harmful” to the economy, and, on the other hand, makes it possible to accumulate huge financial resources, which make Russia a powerful and respected player in the global financial market.