Other way around: inflation devalues existing debts. A small, predictable inflation is a little economic rule that says, "Actual goods and services today are this percentage better than a mere promise of goods and services one year from now."

This sounds like it's immoral, in a way, encouraging consumption and profligacy. But of course, your consumption is someone else's sale; what it really encourages is the production and sale of actual goods and services that hold value better than money (anything from steel to apples to video games). Predictable inflation is a check and balance on the otherwise-natural tendency of capitalism to eat itself by valuing capital assets above all else.