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What could trigger deflation?
Markets reacted tepidly on Monday, as fears that austerity could trigger deflation countered positive sentiment that lowering deficit rates could prevent future inflation.
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Whether or not this triggers deflation of euro-zone prices depends on the role of euro‐denominated assets for collateral and in facilitating commercial transactions.
Dramatic drops in the price of solar power as fossil fuel extraction costs rise, combined with a massive global market for cheap energy, could likely trigger a deflation in the price of energy, says a new investment bank analysis.
At very low inflation rates he Fed will have less room to raise interest rates without triggering outright deflation.
That way money could be created to meet the needs of a growing economy even if the government didn't own an ounce of the yellow metal without triggering inflation or deflation.
What could trigger disinflation's turning into deflation?
Businesses react by lowering prices and laying off yet more workers — which only triggers a new round of deflation.
The household sector can no longer borrow its way to growth: we need to put actual money into their pockets, not just credit backed by inflated house prices, so that they can pay down their historically high debt burden and avoid triggering another cycle of debt deflation such as the one that crippled us in 2008.
This will be a kiss of death for the euro-zone real sector because, to the weaker competitive conditions triggered by currency appreciation, price deflation may add two lethal factors: (1) debt deflation (i.e., increase in the real value of the debt not indexed to prices, as was pointed out long ago by Irving Fisher), and (2) the expectation that prices will continue falling.
The European Central Bank came under intense pressure to boost the supply of cheap credit to the eurozone on Wednesday after figures showed a much-feared period of deflation started in December, triggered by falling oil prices.
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