Why is inflation a concern for businesses and consumers?

Inflation is a concern for businesses and consumers because it can erode the purchasing power of money. Inflation refers to the rate at which the general level of prices for goods and services is rising, meaning that the same amount of money buys fewer goods and services over time.

For businesses, inflation can increase their costs of production, including wages, raw materials, and energy. If businesses are unable to pass on these increased costs to consumers by raising prices, their profit margins can be squeezed. This can lead to reduced investment, job losses, and, in extreme cases, bankruptcy.

For consumers, inflation can reduce the value of their savings and income, making it more difficult to afford the same standard of living. Inflation can also cause uncertainty, as it can be difficult to plan for future expenses if the value of money is constantly changing.