As we mentioned in the opening story, monetary officials are perennially divided between doves and hawks—between those who want to place a high priority on low unemployment and those who want to place a high priority on low inflation. It’s easy to see why high unemployment is a problem. But why is inflation something to worry about? Why do policy makers even now get anxious when they see the inflation rate moving upward? The answer is that inflation can impose costs on the economy—but not in the way most people think.