Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?
That’s not exactly true. If interest rates are above 0%, you can lower interest rates. If interest rates are below 0, quantitative easing can be used (as what happened to help pull the U.S. out of the Great Recession). According to this article, there are even more tools available. Deflation isn’t some inevitability where economists just throw up their hands and say, “oh well.”
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u/StuartMcNight 8h ago
Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?