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Inflation is better described as an increase in quantity of money than as price increases. Price increases reflect future expectation of inflation. If the government begins expanding money supply following a long period of no such expansion, prices will take time to increase as the new money works its way through the unsuspecting economy. However, if the government has been expanding money supply on a regular basis, prices should continue to rise even after the government stops inflating because most people still have the expectation of future inflation. Apart from expectations, prices are also influenced by productivity. If a growing economy is increasing the total goods & services available and the government is increasing the amount of money, prices may remain unchanged -- masking the inflation.

In a recession, people may become worried and reduce their spending (being more defensive with their wealth). Prices may be stable or even drop (so-called "deflation") even as government is expanding money supply -- because money is not being earned & spent on goods (the new money may simply end-up in the purchase of debt instruments -- bonds & money market funds). Central bank increases in bank reserves will not even increase the money supply if recession significantly reduces the rate of borrowing (and increases the rate of loan defaults). Nominal prices may be unchanged in an inflationary recession, while the real prices fall. These examples illustrate that inflation should be described in terms of money supply rather than in terms of prices. Inflation is not caused by a "wage-price spiral" or "excessive economic growth".

Again Monetary Systems and Managed Economies