Inflation is something which is a good indicator of growth, to some extent. A moderate amount of inflation, pegged to be at around 1.5%-2.5%, depending upon the state and condition of the economy is always good and considered so. It spurs spending, which in turn raises demand and it leads to more production and a healthy economic condition in all with demand and supply in balance. All in all, a win win situation for both the consumers and producers. If there is no inflation , growth will be impaired since spending will be low and companies will be loathe to produce, less money in market and interest rates will rise.
Now, if inflation is higher, say more than 2.5% for argument's sake, the value of money will decrease faster than the value of the goods produces, there will be more money in the market than required which will lead to price rise and it will turn into a vicious circle, requiring measures to be implemented by central banks to contain the liquidity flow and as such, contain price rise. Extreme case would be what happened in Zimbabwe.
The real problem occurs when there is something called Stagflation. It's a mixture of inflation and stagnation, where price rise is on a roll, there is high unemployment and the economic growth rate is slowing fast. It raises a dilemma for the economic policy makers since actions designed to lower inflation may exacerbate unemployment, and vice versa! We are in such a situation, right now!
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