Who benefits from inflation? Who is hurt?David Moon answers

By itself, inflation is neither good nor bad. If consumer prices increase 10% in a year that everyone’s wages increase exactly 10%, inflation was irrelevant to everyone’s daily budget. Of course, the economy doesn’t work like that — including the fact that for most people incomes don’t rise in lockstep with changes in consumer prices.

Neither do corporate earnings or stock prices. And just as the effect of inflation depends on whether you’re buying a home, taking your first job out of college or simply trying to fill your car with gas, the implications of inflation are complicated.

David Moon

Most obviously, inflation puts expense pressure on entities that purchase things, which includes most businesses and all people. Corporate profit margins decline, and consumer budgets are squeezed.

Profitable entities with significant fixed-rate, long-term debt actually benefit from inflation, as they are paying their bondholders with dollars that are worth significantly less than the dollars they previously borrowed. The largest example of this type of inflation beneficiary is the federal government.