Question

Factor by which monetary policy influences inflation

Answer 1

In the short run, monetary policy influences inflation and the economy-wide demand for goods and services--and, therefore, the demand for the employees who produce those goods and services--primarily through its influence on the financial conditions facing households and firms.

Answer 2

Monetary policy also has an important influence on inflation. When the federal funds rate is reduced, the resulting stronger demand for goods and services tends to push wages and other costs higher, reflecting the greater demand for workers and materials that are necessary for production