Why is low inflation bad?

Low inflation can be bad for several reasons. Firstly, it can lead to a decrease in demand and economic growth, as consumers delay purchases in the expectation that prices will continue to fall. This can result in a vicious cycle of lower demand and decreased production. Additionally, low inflation can also make it more difficult for central banks to stimulate the economy during a recession, as they have less room to lower interest rates. Finally, low inflation can also increase the burden of debt, as the real value of debt increases over time. Overall, while moderate inflation can help to support economic growth, low or negative inflation can have negative consequences for the economy.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

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