what happens when inflation “goes too low”?


I have seen a few news articles warning that “inflation might get too low”? What does that mean exactly? What happens when inflation gets to 0? What happens when inflation has a negative value?

Thank you!

In: 1

Negative inflation is called deflation, and it can harm the economy in a couple ways… it slows spending and slows investment. People hold off on buying if they think something might be cheaper down the road, which slowed economic activity/GDP, etc. That’s bad for the economy, as it can lead to a downward spiral of less sales meaning jobs cuts, meaning people out of work spending less, meaning more job cuts, and so on.

And when money gains buying power over time, then there is less inventive to invest, which means there isn’t money to lend out to those who want to finance houses or cars, businesses that need investment capital to grow, etc. and this also can slow down the economy.