People with fixed-term contracts, or fixed salaries and pensions, will lose relatively more than others. The real value of the principal and interest repayments will fall very quickly, penalizing creditors in the long term. Second, welfare losses should be expected. The more volatile inflation is, the more uncertainty will increase in the markets. It will be more difficult to plan long-term operations and a higher risk premium will be added to long-term contracts. Higher prices are charged to cover potential (unexpected) higher inflation. Greater uncertainty in exchange rates results in contracts denominated in different, more reliable currencies and insurance is adopted to cover fluctuations in exchange rates. Thus, increasingly higher transaction costs occur, which has a negative impact on long-term economic growth. The International Monetary Fund summarizes the effects of inflation as distorting prices, eroding savings, discouraging investment, stimulating capital flight to foreign assets, precious metals or unproductive real estate. Inflation inhibits growth, makes economic planning a nightmare and, in its extreme form, causes social and political unrest. Authorities choose inflation targeting over other policy frameworks for two reasons. First, price stability – a low and stable rate of inflation – is considered the main contribution that monetary policy can make to economic growth. Second, practical experience has demonstrated that short-term manipulation of monetary policy to achieve other objectives such as higher employment or increased production can conflict with price stability. Central banks appear to be criticized more for raising interest rates (an anti-inflationary tactic) than for lowering them, and they are under constant pressure to stimulate economic activity. Inflation targeting is in principle supposed to help correct this asymmetry by making inflation the main priority.