Deflation can be intuitively thought of as a sustained fall in the prices of consumer goods and services. In this environment, consumers decide to postpone current purchases for some time in the future, when those goods or services can be purchased for lower prices. However, if every consumer behaved similarly, it would create a sustained slowdown in any economy. This is the reason the Fed fears deflation. The Fed does not have the tools to fight deflation.
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The Fed Has Been It's Own Worst Enemy
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Deflation can be intuitively thought of as a sustained fall in the prices of consumer goods and services. In this environment, consumers decide to postpone current purchases for some time in the future, when those goods or services can be purchased for lower prices. However, if every consumer behaved similarly, it would create a sustained slowdown in any economy. This is the reason the Fed fears deflation. The Fed does not have the tools to fight deflation.