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What is deflation?

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Quick answer

Deflation is a general fall in prices across an economy — the opposite of inflation. While cheaper goods sound good, deflation can be dangerous: people delay spending expecting lower prices, which slows the economy and can deepen downturns. It's a broad, sustained fall in prices.

Key things to understand

  1. It's a broad, sustained fall in prices.
  2. It's the opposite of inflation.
  3. It can make people delay purchases.
  4. That can slow the economy and worsen recessions.

People also ask

What is deflation?
A general, sustained decline in prices across an economy — the opposite of inflation.
Why is deflation bad?
People postpone spending expecting lower prices, which can stall growth, cut jobs, and deepen downturns.
What causes deflation?
Falling demand, reduced money supply, or sharp productivity gains can all push prices down.