In times of excessive inflation, central banks are forced to take aggressive action to combat price pressures by increasing interest rates or enacting contractionary measures like lowering bank reserve requirements or liquidating assets, or both. Long-term inflation beyond the desired level can cause the economy to enter stagflation, which is characterized by both high unemployment and high inflation. This twofold issue is unsolvable for the central bank, and the only way to end it is by enforcing vigorous policy tightening to reduce pricing pressures and reduce aggregate demand in the economy. However, this can bring on a new downturn, @silvertop.
!PIMP
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Very well stated @silversaver888 , the central banks only have these tools to fight inflation. Raising interest rates can slow inflation, but it can have negative effects as well.
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