I’ve read that many banks want a certain level of inflation and I don’t really see why. Why is important to banks that a stable product costs more tomorrow than today?
Is it to make people spend their money more since storing it will eventually make is worth less?
In: Economics
It’s mostly what you said here:
>to make people spend their money more since storing it will eventually make it worth less
But also the point of a small positive inflation is to prevent ***de****flation,* which is VERY BAD. Imagine if the buying power of money was always increasing. Sounds good at first, but think of the consequences. You can buy shoes today or a TV later. A TV today or a *car* later. A house today or a …*better* house next year. Deflation actively discourages spending, probably even more than inflation promotes spending. And it’s a runaway cycle once it starts and everyone starts hoarding cash.
If banks tried to keep inflation right at zero, there’s a chance it can slip into deflation and shit goes sideways, so they aim for small but positive inflation as a balance.
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