Inflation is no more. The annual inflation rate is zero for the first time on record. So is the dawn of deflation a good or a bad thing?
Inflation‘s disappearance is thanks to falling gas and petrol prices, reflecting a spectacular fall in the cost of oil on international markets since last summer, writes Neil Macdonald. A price war between the “big four” supermarkets and the big discounters like Aldi and Lidl is pushing down food prices as well.
With more cuts in energy bills due to feed through, many economists believe inflation will turn negative next month and Britain is in for a bout of deflation.
For most of Britain’s post-war history, the country’s had a problem with too much inflation rather than too little. So is the dawn of deflation good news or bad? Here are three reasons either way.
And now the problems:
Most of the problems with deflation only emerge if it goes on and on. So for the moment, we can enjoy it. If prices are still falling next year, it’s probably time to start worrying.