How does Islam cater to inflation when interest is haram?

Sahaba learned deen through companionship and Service (Suhabat o Khidmat) Temporary Migration and Travel for seeking Knowledge and struggling for deen. Jihad internally and externally for ones self and others for deen (Ilm and deen ke liye Safar o Hijrat. However, one should note the desire to be a martyer (Shaheed) and partake in Juhad fiddeen is of the highest caliber!

SHORT ANSWER:

Every year, a Muslim has to give away 2% of his wealth to the poor, it's called Zakaat. And the ideal inflation rate for a modern country is also around 2% per year, pretty convenient. So a Muslim will repond to both Zakaat and inflation in exactly the same way.

In Islam, since you can't use interest to hedge against Zakaat, you must keep working and/or purchasing assets to outperform those 2% per year. If you just sit on your money the Zakaat will eat up around 50% of your wealth within 30 years, just like inflation would at a rate of 2% per year.

LONG ANSWER:

If we are talking about Islam, we need to understand how it was applied to the economy during its first century.

Here’s how an ideal islamic market would look like:

No paper or fiat currency.

No commodity backed standard currency (like the US Dollar under Bretton Woods).

Pretty much any non perishable commodity can be used as medium of exchange at any given time.

Interest is banned.

Futures are banned.

Selling a commodity too low under its market value (only to drive prices down) is prohibited.

So in an islamic system, there can only be shortages or surplus of one particular commodity against other commodities, which would drive up or down the prices of this particular commodity, it’s just basic supply and demand stuff. It has very few in common with the systemic inflation that we experience today in modern economies.

So Islam itself doesn't cater to something that is not supposed to happen in the first place.