nabla9 2 days ago

>Today, we control inflation with changes in interest rates, not changes in the quantity of money.

That's not full truth. In the last 20 yeas central banks do their big and sudden moves using "Open Market Operations". They buy or sell money like assets in market and effectively increase or limit the quantity of money.

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atq2119 2 days ago

Open market operations are the mechanism by which the interest rate is controlled.

Basically, the central bank sets an interest rate target and then performs open market operations until the interest rate matches the target.

That obviously affects the quantity, but the point is that the target is the interest rate. The quantity just ends up being whatever happens to be necessary to hit the interest rate.

nabla9 2 days ago

The target is inflation in both.

When you reduce the volume of assets available, or the price renting the asset, you increase it's value. In this case the asset is money.

Market interest rate is a signal how effective the action is long before inflation statistics is available.