Due to recent recessions including the Russian-Ukraine war and the COVID-19 pandemic, the annual inflation rate in the U.S. slowed to 7.7% in October 2022, the lowest since January of the year. The rate distinctly contrasted with 8.2% in September. Energy costs increased 17.6%, below 19.8% in September, due to gasoline and electricity. A slowdown was also found in food, used cars, and trucks. On the other hand, prices for shelter and fuel oil increased faster. From these trends, it seems like inflation in the United States is still expected to remain high.

The biggest reason why inflation has increased and continued for a long time is the recessions. Currently, there have been two world-scale recessions which are the COVID-19 pandemic and the Russian-Ukraine war. Due to the pandemic, the world has been sunk into the slough of stagnation for several years. First of all, the pandemic has stopped social activity. Because of the contagious virus, social interaction has been paused as people were stuck in quarantine. The international trade industry and many self-employed people have been negatively affected by this pandemic situation. Moreover, The economy lost over 22 million jobs and its scale has shrunk.

The Russian-Ukraine war has affected the world negatively too. Many different industries such as the energy industry have been damaged because of this war. The oil price has skyrocketed and worldwide inflation is triggered.
To fix this situation, the United States is now trying to use some effective policies. One of them is monetary policy. Monetary policy is a central bank’s action and communication that manage the money supply. By controlling the supply of money, the U.S. is trying to handle this inflation situation. The central bank's monetary policy prevents inflation by reducing unemployment and promoting moderate long-term interest rates.

There are three main objectives of monetary policy. The most important one is, as mentioned before, to manage inflation. The secondary objective is to reduce unemployment but only after controlling inflation. Inflation and unemployment are closely related because there is a trade-off relationship between them. The central bank uses monetary policy to solve both of the problems which are inflation and unemployment. The last objective is to promote moderate long-term interest rates.

Then how do the government and the central bank use this monetary policy? They use the open market operation, the reserve requirement, and the discount rate. The government and central banks are using these three main tools to perform monetary policy to fix the high inflation.

Through these various tools and policies, the United States is currently working to stop this worldwide trend, inflation. In order to stop this economic stagnation, the nation must utilize policies to prevent further damage.