why is inflating good?

Question

Government and economists say, that ideal inflation is about 2%.. why is that? Why is 2% of my savings disappearing every year good? (In ideal case)

In: Economics

Answer 1

It’s less that inflation is good and more that deflation is so much worse that it’s better to manage a currency for slow, manageable inflation than risk a currency going into deflation. It also has the knock-on effect of encouraging people to invest/spend their cash rather than just sit on it, which improves the economy.