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Monetary inflation is a sustained increase in the money supply of a country (or currency area). Depending on many factors, especially public expectations, the fundamental state and development of the economy, and the transmission mechanism, it is likely to result in price inflation, which is usually just called "inflation", which is a rise in the general level of prices of goods and services.[1][2]
There is general agreement among economists that there is a causal relationship between monetary inflation and price inflation. But there is neither a common view about the exact theoretical mechanisms and relationships, nor about how to accurately measure it. This relationship is also constantly changing, within a larger complex economic system. So there is a great deal of debate on the issues involved, such as how to measure the monetary base and price inflation, how to measure the effect of public expectations, how to judge the effect of financial innovations on the transmission mechanisms, and how much factors like the velocity of money affect the relationship. Thus, there are different views on what could be the best targets and tools in monetary policy.
However, there is a general consensus on the importance and responsibility of central banks and monetary authorities in setting public expectations of price inflation and in trying to control it.
Currently, most central banks follow a monetarist or Keynesian approach, or more often a mix of both. There is a trend of central banks towards the use of inflation targeting.[2]