Inflation is not necessarily a negative process; in fact most economists agree that the negative impact of small levels of inflation is outweighed by the risk of deflation. Deflation is the scenario in which the interest rate is negative. Moreover, inflation can also increase pressure on consumption spending that boosts economic activity as the purchasing power of money falls overtime. What must be avoided are high levels of inflation or at the extreme hyperinflation. Hyperinflation can render private savings utterly useless in a short space of time creating social problems and uncertainty.
For example, a look at the 20 countries with the highest inflation rates in the world in 2020 shows that Venezuela experienced an inflation rate of over 65,000 percent. This had a detrimental effect on the economy, adding further to political and social turmoil that caused hyperinflation in the first place.
Generally, high periods of growth are correlated with inflation due to the wage-price spiral. As economies grow, incomes grow. In turn, additional demand causes prices to rise. Workers then demand higher wages to afford the new higher prices. Thus the spiral continues. Here we see that inflation in the United States is reasonably low as economic growth is also reasonably low compared to developing economies around the world. This in part explains why projected inflation rates for the United States are lower than projected global inflation rates.
In 2012, the United States Federal Reserve set an inflation target of 2 percent per year. Although inflation targeting is a decades old policy approach adopted by central banks worldwide after being pioneered by New Zealand in 1990, it was the first time the United States had set such a target. The purpose of having an inflation target is to provide policy transparency and stability in market expectations. By setting a positive target countries are also more likely to avoid deflationary pressures and the negative economic impacts of such a scenario in the near future. However, the projections for the annual inflation rate up to 2021 suggest coming close to such targets may take more time due to the COVID-19 pandemic.