[tangent128]

(I think your definitions are reversed- a decrease in money supply is associated with deflation, not inflation.)

[dougSF70]

From the interwebs: In the U.S., the money supply is influenced by supply and demand—and the actions of the Federal Reserve and commercial banks. ... More money flowing through the economy corresponds with lower interest rates, while less money available generates higher rates."

Higher rates = higher cost of borrowing = higher prices = higher inflation.