Who is helped by inflation?

Some inflation is good as it motivates savers to deploy their capital into the economy, however too much inflation negatively impacts most stakeholders in the economy. The sole beneficiaries would be borrowers who locked in a low interest rate prior to the inflation increasing as it reduces the real value of their debt and if the business/government has the ability to raise prices and increase their revenue than they could become more financially viable. On the other hand, savers and those on fixed incomes will be negatively impacted as their savings lose value and their purchasing power decreases. Companies that have thin margins are also negatively affected by inflation as it increases their operating costs making it harder for them to maintain profitability. Inflation increases the hurdle that companies face to remain viable companies and prioritizes short-term profits over long-term gains as money earned this year will be worth significantly more than money earned in the next years. It is for these reasons that high inflation is aggressively combatted by central banks as it has the power to destabilize the economy.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

Similar Questions

Does quantitative easing cause inflation?

Quantitative easing (QE) is a monetary policy used by central banks to stimulate the economy by increasing the money supply. Some ...

What caused inflation in germany?

Fundamentally inflation is caused by too much money chasing too few productive uses of this money, inflation in 2022 however was m...

Who loses from inflation?

Inflation is an increase in the overall price level of goods and services in an economy. It can have a number of negative effects,...

Ready to get started?

Download our app and start gaining insight into your current and future finances.