Maintaining price stability is the main goal of most European central banks, including the Croatian National Bank. Maintaining predictable and low inflation rates is of crucial importance for economic growth and development. The aim of this paper is to show the inflation trends in the Republic of Croatia from 1998 to 2017 and to analyse trends in unemployment, real gross domestic product (GDP), GDP deflator, M1 monetary aggregate, nominal effective exchange rate of kuna and middle exchange rate EUR/HRK. The goal is, also, to build models linking inflation with selected macroeconomic variables based on econometric methods. The research results showed that the rate of inflation in the observed period was low, with no major anomalies. A simple linear regression analysis was conducted to establish the link between the GDP deflator (alternative inflation measures) and the M1 monetary aggregate. The results have shown that for the increase of M1 monetary aggregate for one unit, GDP deflator is reduced by 0,067, ceteris paribus hence, further research is needed. In the second model, the relationship between the GDP deflator and the M1 monetary aggregate and the nominal effective exchange rate of the kuna were examined using a multiple regression analysis. The results showed a negative impact of the nominal effective exchange rate on the GDP deflator. The last model examined the relationship of GDP deflator with M1 monetary aggregate and the annual average of the EUR/HRK mid-exchange rate. The results have shown that by decreasing the EUR/HRK exchange rate, inflation is rising, which can be explained by the more significant impact of the exchange rate on production costs and by the excessive reaction of monetary policy due to "fear of floating".