Fundamentals

Inflation and Responsibility: Who Is Responsible for Lost Purchasing Power?

By Daniel Sardá · Published on September 18, 2026

6 min read1,253 words

Inflation does not automatically make the person who raises a price culpable. Understanding it requires separating causes, mandates, and accountability.

When money buys less, the question of responsibility arises at once: was it the government, the central bank, businesses, consumers, or an external crisis? A serious answer cannot fit into a single name or slogan. First, we need to establish what happened; then, which decisions contributed to it; and finally, who had the institutional duty and means to keep the problem from persisting.

Inflation is a broad, sustained increase in the price level that erodes a currency's purchasing power. Price indexes measure it using a basket of goods and services, so each household may experience rising costs differently. That variation, however, does not turn every price increase into inflation.

Key idea: A more expensive product changes a market signal; broadly rising prices change money's purchasing power.

Before assigning blame, distinguish the phenomenon

If a drought reduces a harvest, the affected food may become more expensive. If a trade route is disrupted, energy prices may rise. These changes can be significant and painful, but they also convey information about scarcity and help adjust consumption, production, and investment. Simply calling them inflation erases a useful distinction.

An inflationary problem begins when pressure spreads across a broad range of prices and persists. A one-off increase may trigger later strains, but it does not by itself explain why those strains pass into wages, contracts, rents, and pricing decisions in many sectors. The IMF notes that supply shocks, excess demand, and expectations can all play a part in this dynamic. None should be used as an automatic, single explanation.

This distinction changes the debate. Saying that a company passed on a higher cost may describe a specific decision; it does not show that the company controls the general price level. Saying that families expect prices to rise may describe a prudent response; it does not prove that their foresight created monetary deterioration from nothing. Explaining conduct does not exempt it from all criticism, but neither does it assign powers it does not have.

Three meanings of responsibility

The word “responsibility” often combines distinct levels of analysis. Separating them lets us ask better questions.

• Causal responsibility: who contributed to an outcome through an action, omission, or rule.
• Institutional responsibility: who had a mandate and the tools to protect a public objective, such as price stability.
• Accountability responsibility: who must explain decisions, acknowledge mistakes, and submit to oversight.

A monetary authority may not control a global energy shock, but it must explain how it assesses the shock's possible spread and which tools it uses within its mandate. A government may face a legitimate emergency, but it must make clear how it finances it and which costs it shifts into the future. Businesses and households make decisions under those conditions; their room to adapt is real, though it is not equivalent to the power to set fiscal and monetary rules.

Key idea: Influencing a price is not the same as having a mandate to safeguard the currency's value.

Deficits, money, and persistence: a conditional relationship

Public deficits deserve scrutiny because they can create a conflict between financing needs and price stability. Still, “there is a deficit, therefore there will be inflation” is an overly crude formula. What matters is how it is financed, how much capacity the economy has to absorb the spending, which rules constrain decisions, and whether monetary policy can genuinely remain oriented to its mandate.

The IMF literature on fiscal dominance describes a specific risk: monetary policy can become constrained by fiscal demands. In that scenario, the authority responsible for stability loses room to act according to its objective because other public decisions put pressure on its financing. This diagnosis should not be applied to every country without evidence; it is, however, a reason to demand understandable budgets, credible limits, and a clear division of responsibilities.

Imagine a government that promises permanent spending while relying on cheap credit and expecting the monetary authority to ease financing if its accounts become strained. Even if this does not produce inflation immediately, it has created incentives to subordinate price stability to a fiscal need. Responsibility does not end with the act of issuing money: it also lies in the rules and commitments that made that course politically attractive.

Expectations matter in this process because they shape current contracts and decisions. If workers, suppliers, and merchants expect prices to keep rising, they may try to protect themselves. But that response requires context: it should not be treated as a mysterious force that excuses those directing policy, or that makes every expectation a sufficient cause. Trust is built—or lost—through actions, communication, and predictable rules.

Autonomy does not mean freedom from oversight

A monetary authority with operational independence may be better able to resist the temptation to finance short-term objectives at the currency's expense. But independence is not a shield from criticism or a guarantee of perfect results. The BIS presents mandate, independence, and accountability as complementary elements.

This requires a legally clear mandate, explainable decisions, and public oversight without partisan instructions on each instrument. Autonomy over means can be compatible with democracy precisely when the ends, limits, and mechanisms of evaluation are visible. An institution that asks for trust without offering reasons weakens the credibility it needs.

Key idea: Useful independence protects technical decisions from immediate pressure; accountability requires those decisions to be justified to the public.

It is also worth examining the rules that limit discretionary power. Rules that constrain discretion reduce the scope for changing the monetary or fiscal framework to suit the political urgency of the day. They do not replace judgment in a crisis, but they make it easier to identify who decided, under what authority, and within which constraints.

What businesses and households can do

Businesses compete, adjust prices, absorb costs, or seek alternatives; households compare, save, and renegotiate. These responses are part of an open economy and should not be moralized as though they were a conspiracy against consumers. If fuel rises temporarily, for example, a transport company may revise its fares to avoid operating at a loss. Readers can judge the quality of that service or the strength of competition, but the case still does not establish general inflation.

Private responsibility matters in another sense: honoring contracts, communicating terms clearly, and not seeking privileges that shift losses onto others. Yet asking for individual prudence does not replace the public duty to avoid rules that make economic calculation unpredictable. Lost purchasing power affects those least able to protect their incomes most severely, but the answer is not to turn their everyday decisions into the main target of reproach.

A more demanding question for public debate

Whenever someone claims to know “who caused inflation,” it is worth asking: are they referring to a relative price or a broad increase? Are they describing a trigger or a condition that made the process persistent? Are they identifying someone who had influence, or someone who held institutional authority? These questions do not eliminate disagreement, but they keep indignation from replacing analysis.

A liberal perspective does not require denying shocks, business errors, or social hardship. It demands something more concrete: general rules, limits on the discretionary use of power, and identifiable decision-makers when choices compromise the currency's value. Understanding the causes of inflation makes it possible to discuss mechanisms; assigning responsibility rigorously makes it possible to correct them without inventing a single culprit.