How deflation affects us

A general fall in price levels caused by a decline in the supply of money or credit, or by a fall in spending.

It can lead to severe economic depression and to high levels of unemployment because of a decline in demand.

Central banks respond by cutting official interest rates close to zero and increasing the money supply in an attempt to stimulate higher prices.

Text: Reuters

Images: Getty (Unauthorised reproduction prohibited)

Also see: Inflation rate hits negative zone