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
Inflation encourages spending. Economies work because people interact with it, and exchange money. The worst thing to happen to an economy is if people simply stopped using it.
Inflation helps push that along, it encourages you to do something with your money, meaning spend it, not save too much.
Though its often easier to see from the opposite side: deflation. That means if I don’t spend my money, it will grow. That means the entire economy is better of not interacting with each other and sitting there doing nothing. No jobs, no spending, nothing, you just sit there. You can imagine how successful an economy would be if no one wanted to spend money on anything.
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