However, when inflation becomes high and volatile, many prices in the economy start moving up together. Seeing a higher price may no longer prompt you to search for a better one because you may believe that all other prices have also increased. That’s a problem because comparison shopping encourages competition.
If people don’t believe they can find a better price by shopping around, firms have more leeway to increase markups, leading to distortions that make the economy less efficient and consumers worse off.10 If inflation stays above target for a significant amount of time, then high and variable inflation will likely go hand in hand with a less efficient, more distorted economy.