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
That’s exactly it.
Consumer spending drives about 2/3 of the economy. Inflation helps ensure that money is being moved around instead of being held stagnant – this is required for an economy to work.
If you knew that in a year the cash stuffed in your mattress will be worth 3% less than it is now, you’d want to at least put it into an investment that gains 3% a year, right?
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