A high rate of inflation can be very bad for a country's economy because it typically discourages saving and investment.

Inflation is a situation in which the buying power of currency is expected to go down in the future. So, a dollar will be able to buy less in the future than it can today. Such an expectation causes people to spend their money as soon as they get it, rather than save it for the future.

If nothing is done to fight inflation, it can spiral out of control in the following manner: Businesses so easily sell their products that they are able to easily raise their prices and easily give salary raises to their employees. Those salary raises are required in order to keep employees, who demand ever higher wages so that they are able to afford the escalating prices on the products and services that they need to buy. It is a cycle that viciously feeds on itself, due to the ongoing expectations of producing businesses and their consuming employees.

Interest rates are typically forced to be a few percentage points higher than the inflation rate, because lenders want to make sure that the money they get in return for lending will more than compensate the loss in value of the money due to inflation. After all, why would anyone lend money at, say, 6% interest, if the inflation rate is 10%. It would mean that the lender gets back a total amount of money, including interest, that has 4% less buying power than it had before it was lent.

Since high inflation necessarily pushes interest rates higher, businesses have difficulty expanding during inflationary times due to the higher cost of borrowing.