Inflation is the rise of prices over time. In a growing economy, prices increase because people borrow money to purchase or invest in things they cannot yet afford. Notice how borrowed funds (which are, at the root, sourced from the Fed) basically popped into existence without being attached to any production. Since someone’s spending is another’s income, the purchases that stem from borrowed funds will be seen as extra demand, encouraging the selling party to raise prices of their goods or services. When the prices rise too quickly, the Fed can increase interest rate to discourage borrowing.