Traditionally the tool governments used to &quot;manage&quot; inflation was interest rates with the central bank. The central bank lends money to regional banks which can then lend it to industry or people. Lower the rates, more money flows into the economy[1], labor shortages and goods shortages drive up prices[2]. Voila, inflation.<p>[1] We have an interesting (if not unprecedented) situation in the USA where low interest rates have resulted in capital accumulation at companies rather than investment, and stagnant wage growth. It is, at Tim Geitner once said, &quot;The part of the economics textbook that hasn&#x27;t been written yet.&quot; And while I got to experience the &quot;unheard of&quot; condition known as &quot;stagflation&quot; (a stagnant economy but high inflation&quot; my kids get to experience this thing we&#x27;re currently experiencing. If it turns into a deflationary spiral it will mean that things like real property prices will go down.<p>[2] Much of the housing bubble has been blamed not only on lowering standards for mortgages but also the lower costs of mortgages which means the same house can be priced higher and still be affordable by the target buyer.