Eli5: Why is deflation more difficult to fix than inflation?
In: Economics
The biggest thing is that central banks mostly control inflation by manipulating interest rates. If inflation is high you raise interest rates and it comes back down, if it’s too low you lower interest rates and it goes up.
You can always make interest rates higher so you can (almost) always tame inflation. However, with deflation you can’t really go (much) below 0% interest so if you get into a situation where interest rates are at 0% and you still have deflation there isn’t much you can do in the realm of normal monetary policy.
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