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Author Topic: Low inflation a problem?  (Read 6863 times)

Nivek

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Low inflation a problem?
« on: April 17, 2014, 12:07:21 pm »
Quote
Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices, Federal Reserve Chair Janet Yellen said on Wednesday

http://www.reuters.com/article/2014/04/16/us-usa-fed-yellen-idUSBREA3F1A420140416

Coming from South Africa where high inflation is always the problem, this seems hard to work out. Why wouldn't low inflation be a good thing? I would think that if inflation is low you would keep salary increases low and everything would be normal.
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Neil

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Re: Low inflation a problem?
« Reply #1 on: April 17, 2014, 01:13:26 pm »
Low inflation is bad from the standpoint that consumers feel less pressure to spend now than in the future. Where as with high inflation consumers spend now rather than later because the price of goods will be higher in the future than what they currently are.

Low inflation good for savers. High inflation good for spending
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Luna

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Re: Low inflation a problem?
« Reply #2 on: April 17, 2014, 02:16:18 pm »
Inflation - Good for politicians?
Deflation - Good for citizens?
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Neil

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Re: Low inflation a problem?
« Reply #3 on: April 17, 2014, 09:17:38 pm »
you actually need a balance. you cant have too high inflation but you cant have too low inflation.

a good level of inflation is good for the whole. ie the economy.

PS: the reason I gave previously is also a reason why controlling the interest rate controls the inflation rate
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