Although money should be just an intermediary tool for trade and negotiation, an artificial asset that is neutral, in the short run this intrinsically valueless paper can distort the markets, even if it has predictable value, but only if it is manipulated into being a store of value that has a better risk adjusted return than private market stores of value.
Paper money has no intrinsic value in itself. If the fed keeps it predictably devaluing fast enough, always moving it towards its intrinsic value, it acts as a very useful enabler of trade by creating a unit of measurement for value and medium of exchange.
But unfortunately, for fiat to enable trade, it also has to artificially be made into a store of value. If this paper is made into a store of value that retains value better than private stores of value (such as stocks, bonds, or just stockpiles of stuff), it jams the markets for private stores of value. It turns savers into accumulators of pieces of paper or numbers in accounts instead of being holders of things that are backed by economic activity and wealth creation. It becomes a subsidy from investors, entrepreneur, job creators and workers to holders of pieces of paper. It is the worst kind of subsidy because it blocks wealth and welfare creation.
The only way for central banks to allow private markets to function properly, is to get money out of the way by making sure it always devalues fast enough that it doesn't overly displace private stores of value that are backed by real economic activity.