Inflation is friend or enemy?

 Inflation can be both a friend and an enemy, depending on the context. Let’s explore both sides:

1. Friend:

   • Stable Inflation: Mild inflation can be beneficial for economies. It encourages spending and investment because people expect prices to rise gradually. Central banks often target a low and stable inflation rate (around 2% per year) to promote economic growth.
   • Debt Relief: Inflation erodes the real value of debt. Borrowers benefit because they repay loans with money that is worth less than when they borrowed it.

2. Enemy:

   • Fixed Incomes: For people on fixed incomes (like pensioners), inflation erodes their purchasing power over time. Their money buys less as prices rise.
   • Savings Erosion: High inflation erodes the value of savings. Savers lose purchasing power, especially if interest rates don’t keep up with inflation.
   • Distortions: Inflation distorts economic decisions, making it harder to plan for the future.

In summary, moderate inflation can be a friend, but high or unpredictable inflation becomes an enemy. Central banks play a crucial role in managing inflation through interest rate adjustments.