This study explores the long-run effects of inflation on income inequality in an openeconomy Schumpeterian growth model with heterogeneous households, firm-level innovation, and cash-in-advance constraints on R&D investment. We find that the relation between domestic inflation and income inequality depends on the global real interest rate. Specifically, income inequality monotonically increases with domestic inflation if the influence of a country’s technology growth on the global real interest rate is low, whereas it displays a U-shaped pattern when the influence is sufficiently high. In contrast, foreign inflation always reduces domestic income inequality by stifling domestic economic growth. These predictions are supported by our quantitative model calibrated to the US and eurozone economies and empirical results using cross-country data.