How inflation works: why your money buys less every year
Why central banks aim for 2% inflation, not zero
The people who look after a country's money could aim for prices that never move. Instead, they aim for prices that rise a little every year. Why would they want your money to buy less?
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The central banks of the United States, the euro area, the United Kingdom and Japan all aim for the same thing: prices that rise about 2% a year. That aim is called an inflation target.
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Your jar still says $30. At $4.90 a scoop, it buys only 6 scoops now, not 10. And at 2% a year, prices double in about 35 years. So why not aim for zero, and let your money keep its value for good?
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