Definition
A broad, lasting fall in prices across the economy: the opposite of inflation.
The story
Cheaper prices sound good, but a long stretch of them can hurt: people delay buying because things may be cheaper later, companies earn less, and debts get harder to repay in real terms. Japan struggled with mild deflation for much of the late 1990s and 2000s.
Why markets watch it
Central banks try hard to avoid deflation, which is part of why the Fed aims for 2% inflation rather than zero.
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms