First, it makes business decisions and investments uncertain. If prices are changing, it's tricky for two firms to enter into a long-term contract. It's also difficult for people to plan for retirement, because they can't be sure how much their money will buy. Inflation hurts people on fixed-incomes because it means they can buy less. It tends to discourage saving and investment because when inflation hits, people rush to buy things before prices go up further.
Inflation also tends to benefit people who owe money and hurt people who lend it.
As prices rise over the life of a loan, the money lent out loses value. McGuirk isn't surprised to see shoppers pulling back. We're victims of our own success. Due to the recent weakness in car sales, this week Chrysler, Ford and a major parts maker idled factories. The parts maker announced layoffs, one of several indicators of trouble on the horizon.