While this certainly is not a palpable economic phenomenon in the euro area today, a handful of hyperinflation episodes in economic history still makes this so-called “inflation tax” one of the most widely known examples of the undesirable consequences of inflation. By setting the “inflation tax” to negligible levels, price stability minimises transaction costs in the economy as a whole.
This benefits all citizens on a daily basis, and even more so those who are not in a position to protect themselves against inflation. Finally, inflation brings about an arbitrary redistribution of income and wealth. The more vulnerable groups in society typically suffer the most from inflation.