Why Inflation is Low…and May Be That Way for a Long While

by Juan M. Sánchez , Hee Sung Kim of the St. Louis Federal Reserve

The St. Louis Fed on why inflation is low (several good reasons) and why that may be the case for a while. Of course, that is not a good trend for the largest debtor in the known universe, Uncle Sam.

"While a moderate inflation rate can be beneficial for the economy, there are several reasons to be concerned about very low inflation. First, an inflation rate lower than the 2 percent target for a long period of time may signal that the monetary authority does not have inflation under control or that its commitment to the target is not that strong. Second, very low inflation is typically associated with an increased probability of falling into deflation, in which prices and wages are declining on average. Deflation, in turn, is a phenomenon associated with weak economic conditions."

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Why Inflation is Low…and May Be That Way for a Long While

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