You don t want to be caught holding money or other dollar denominated assets when there is inflation, they will lose purchasing power, lose value. The biggest problem with inflation is that it creates uncertainty for businesses. They can t trust price movements to be real. Remember how we talked about the signals that firms get from prices. Inflation hides relative price movements that normally signal firms as to the relative scarcity of goods.
Inflation also creates uncertainty, making some investment projects look less attractive.
It is harder to agree to an interest rate on a loan if you aren t sure how much inflation there will be. The potential for losing money if you lend, makes some people require a higher return on investments, so fewer firms will want to borrow. This means there will be less investment. This is bad because investment leads to capital accumulation and real wealth over time. Another problem with inflation is that, if it gets bad enough, people have to spend a lot of time trying not to hold money.