Recent years have seen substantial prog? ress in our understanding of pricing decisions at the micro level. Access to large-scale data sources on prices of individual products has given us rich information on how frequently prices change, by what magnitude, and how the aggregation of price changes in individual firms maps into aggregate inflation (see, among many others, Mark Bils and Peter J. Klenow 2005). These facts about price movements are a key input in recent quantitative models of the aggre? gate effects of nominal rigidities (e.g., Mikhail Golosov and Robert E. Lucas 2007). In this paper, we use both the new facts and the new quantitative models to revisit an old question, namely, that of quantifying the welfare benefits of low inflation. Our model includes two