...........Moderate inflation is fine. High inflation close to 10% is detrimental in many ways. First, of course, with high rate of inflation, to keep people saving in fixed income, you need high rates of interest. Real interest rates may not be very high because they are nominal minus inflation, but because the business house that is investing, it has to invest at those high nominal rates. The possibility that inflation may come down creates a lot of fear about locking in at those levels, so it creates a dampening effect on investment. It has an effect on external account, if inflation is high, there is a natural tendency for currency to depreciate relative to the rest of the world and......................
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