You inherit inflation at 7.6% and expectations already drifting. You have fourteen quarters and two agenda items each quarter to bring prices back to target — without crushing the labour market or breaking the banks. The catch is the one every central banker lives with: nothing you do today reaches prices for two quarters. Free in the browser, no install and no account.
You cannot steer inflation by looking at inflation. By the time the CPI print moves, it is reporting on decisions you made six months ago. Win this and you will have used the concept of policy lags and expectation anchoring, not just read the definitions.
RAISE RATES — adds tightening to the pipeline, where it sits for two quarters before it touches demand or prices. Two things do happen immediately: the currency firms, which makes imports cheaper, and bank balance sheets take strain. That split between the fast exchange-rate channel and the slow demand channel is real.
CUT RATES — eases, and if inflation is still high it costs you credibility badly. This is the 1970s error: the Fed eased at the first sign of recession, inflation surged back, and breaking it later required rates near 20%.
HOLD — the hardest decision, and an active one. When tightening is still working through the pipeline, holding can be the tightest available policy. Piling more on top of unfelt tightening is exactly how central banks overshoot into recession.
FORWARD GUIDANCE — moves expectations by promising a future path. It only works if your deeds back your words: issue guidance while the real rate is still negative and markets price it as bluff, and your credibility falls instead of rising.
LIQUIDITY BACKSTOP — lends to stressed banks against collateral without cutting rates. This is Bagehot's rule from 1873 and the modern separation principle: you can stop a financial panic and keep fighting inflation at the same time.
Expected inflation feeds into wage demands and price setting, which makes it partly self-fulfilling. When expectations stay anchored at target, a price shock fades on its own. When they break loose, a wage-price spiral begins and the cost of getting inflation back rises enormously. Credibility is what keeps the anchor holding — which is why it behaves here as a resource you spend and rebuild.
One playthrough runs about fifteen minutes. It needs no login, no install and no student accounts — a link is enough. Every ending debriefs a different failure mode: expectations de-anchoring, a policy-induced recession, a financial crisis from hiking too fast, or simply running out of time. The model is deterministic, so a class can replay the same scenario and compare strategies fairly. Suitable for senior economics covering monetary policy, inflation, and central bank independence.