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?
There is something called Impossible Trilemma in economics where government can only control two of three things: free capital movement, monetary policy, exchange rate.
The short of it is, if you have free capital movement and use monetary policy (cut interest rate, print money), then your exchange rate must float (will depreciate in this case). You may defend the depreciation until you run out of foreign reserve, but beyond some point your currency goes into freefall / hyper inflation. This is "bad inflation".
"good inflation" is demand-pull, not cost-push / money-supply driven. So yea, you can create inflation, but it wont be productive for the economy.
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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?