There is a two-way relationship between exchange RATES and inflation. When U.S. consumers buy foreign products they pay PRICES that reflect the exchange rate of the dollar against the currency of the country that produced the product. For example, if the IMPORTER of German beer to the United States must pay more dollars for the same amount of beer he usually buys, then U.S. consumers will in turn pay more dollars to the importer when they buy the beer at their grocery store. Thus, the exchange rate between Germany and the United States can IMPACT inflation in the United States. Of COURSE, inflation in either country could also impact the exchange rate between the two countries.

There is a two-way relationship between exchange rates and inflation. When U.S. consumers buy foreign products they pay prices that reflect the exchange rate of the dollar against the currency of the country that produced the product. For example, if the importer of German beer to the United States must pay more dollars for the same amount of beer he usually buys, then U.S. consumers will in turn pay more dollars to the importer when they buy the beer at their grocery store. Thus, the exchange rate between Germany and the United States can impact inflation in the United States. Of course, inflation in either country could also impact the exchange rate between the two countries.