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?
Deflation is a symptom, rather than the core issue. The issue is people are reducing spending, and this reduced spending means businesses sell less, build fewer houses, dont invest to increase capacity etc. This leads to job losses and people end up spending even less, creating a vicious circle. This decline in economic activity shows up as low inflation or deflation in macro data. You can print money to counter it, but it doesnt address the root problem.
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u/StuartMcNight 9h 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?