Disinflation, a decrease in the rate of inflation, is different from deflation

Economists define deflation as a sustained decline in prices across an economy

Deflationary periods are characterized by broad, significant price declines. The Federal Reserve can monitor deflation by tracking prices through price indexes, such as the Consumer Price Index (CPI), which characterizes the average costs for consumers each month.

'Good deflation' happens when prices naturally track with supply, meaning prices change gradually

This tends to make products and services more affordable and normalizes the standard of living. Bad deflation usually happens when there are sudden changes to either supply or demand. Near-zero [interest rates helped create the real estate bubble that sparked the Great Recession when it crashed](https://www.youtube.com/watch?v=LMo9mD8j7IA&t=91s) Because deflation distorts the value of money, deflation is particularly harmful for borrowers. Low interest rates made it easy for businesses and everyday people to take on enormous debt, which exacerbated the effects of the recession.

Falling demand and lower costs of production cause deflation

"Falling demand" refers to anything that changes someone's willingness to spend money on goods and services. Global recessions, fears of a worldwide recession, and a fall in the money supply are all factors that could lead to falling demand. Likewise, lower production costs allow companies to increase production, which can lead to a surplus in supply.

Inflation is a monetary phenomenon in which consumers see a broad rise in the prices of goods and services across the economy over time

Sustained periods of inflation are often caused by central bank policies including low interest rates or increased money supply. With more money chasing the same number of goods and services, prices tend to rise and the value of a single dollar drops.

The psychological aspect of deflation makes it difficult for policymakers to stabilize the economy

That psychological aspect is referred to as "the deflationary spiral." When prices start decreasing, people tend to hold on to their money to pay the lowest prices. But as prices start stabilizing, people resist increasing prices. (Some users may experience a paywall.)

Inflation was a word before deflation was

The word inflation has Latin roots and technically means an influx of air, first appearing in the English language in the 1890s to describe bike tires. Deflation's first known mention in an economic text was in 1919.

Prices can still feel high even if inflation is slowing

This is partly because a recent spike in inflation raised prices permanently, so even though the pace of price growth has slowed, prices have still gone up for good.

China had an inflation rate of -0.4% in August 2025

As opposed to other G20 countries that are largely struggling with high inflation rates, China is facing deflation. Sluggish growth in the country's once booming real estate market is just one glimpse into the consumer slowdown triggering deflation.

The Great Depression is one of history's most notable periods of deflation

The stock market crash of 1929 helped trigger a period of deflation in the United States by creating a drastic decrease in the total money supply. Because of the United States' central role in the world economy, virtually every single country was impacted by the recession.

Inflation explained in under 3 minutes

Keep seeing inflation in the news, but don't have a great grasp on what it means or how it works? This overview from 1440 breaks down how economists think about inflation, what it means for the average consumer, and how governments attempt to keep rising prices in check through various policies.

US inflation can generally be split into to two periods—before and after the Federal Reserve

A central bank itself does not mean significant inflation will occur, but economists generally point to factors like two world wars and the printing of money to finance the US federal deficit as primary drivers of price increases.

The world's most famous case of deflation happened after Black Thursday

While the details are not fully agreed upon, many economists point to the Federal Reserve's tightening of the money supply as a prime culprit, leading to a significant deflationary spiral.

Fast-food prices have increased more over the past 10 years than both full-service restaurants and inflation.

The Federal Reserve can set interest rates below zero

Interest rates, the cost of borrowing money, are the primary tool the Federal Reserve uses to control inflation. During periods of deflation, setting interest rates below zero penalizes saving, encourages banks to lend more and moves more cash through the economy.

Technological advancements are historically deflationary

Technological innovation can drive down costs and prices for businesses, which can increase real wages for employees. As a result, people have more money to spend and demand increases.

The highest inflation ever recorded in US history was estimated at 30% in 1778, just after the Revolutionary War.

One signal that a recession has become a depression? When GDP declines more than 10%

There’s no single definition for recessions or depressions, but both are marked by sustained periods of declining economic activity. Depressions are more severe than recessions.

Read former Fed chair Ben Bernanke's 2002 speech about preventing deflation

Very low inflation rates in the early 2000s in the United States and a worsening recession in Japan sparked some domestic concern over the threat of deflation. While Bernanke wasn't Chair at the time of the speech, he emphasized the Fed's role in preventing deflation.

Raising interest rates can help control inflation

While controlling a complex and dynamic economy is difficult, interest rates—more specifically, the rate at which banks lend each other money overnight—are a powerful tool. Generally, raising the rate makes purchases more expensive and cools an overheated economy.

The Federal Reserve targets 2% inflation

It’s an arbitrary number originating from an offhand comment made by a New Zealand policymaker. The real objective is to maintain predictable prices for businesses and families to plan around while avoiding the dangers of deflation.

COVID-19's shock to employment rates sparked some economists to fear deflation

COVID-19 simultaneously disrupted the supply chain and the labor market. Since the unemployment rate had hit record highs, some economists were worried that the supply chain would recover before the labor market. If that had happened, businesses would have been producing goods, but no one would have been able to buy them because they wouldn't have the disposable income to do so.

President Trump's 2025 Tariffs added less inflationary pressure to the economy than expected in their first year

A year after the so-called "Liberation Day" in April 2025, tariffs have had a milder effect on inflation than feared—core goods prices have added only about 0.2% to the headline Consumer Price Index—but persistent policy uncertainty has rattled small business owners, who say the constant back-and-forth makes long-term planning difficult.

In President Trump's first year of his second term, inflation fell from 3% year-over-year in January 2025 to 2.7% in December

While the price of eggs and bread went down over Trump's first year in office during his second term, coffee and beef prices rose. Utility bills and home insurance continued to surge, but mortgage rates, rent, and home prices began to stabilize in 2025.

A recession is commonly defined as two consecutive quarters of shrinking GDP, but in practice, these economic phenomena are more complex.

'Loveflation' is making dating more expensive and less frequent

A survey found that more than half of Americans are going on fewer dates due to rising costs, with 27% stopping altogether. Gen Z and millennials are the hardest hit, with 62% reporting changes in their dating habits due to inflation.

Why there's a snack recession

Inflation and economic uncertainty have driven many Americans to make cuts to their snack budgets, according to reports from major food manufacturers like General Mills, JM Smucker, and Campbell's. Major retailers have also observed lower-income consumers cutting back on nonessentials due to the macroeconomic environment.

Artificial intelligence might make companies too efficient—which could trigger deflation

AI innovation will likely decrease costs for companies and lead to a large increase in supply. That dramatic increase could conceivably bring prices down but keep supply high. However, AI's real impact will likely be complicated by its impact on human labor and the cost of new technology.

Japan's 1990s deflation followed the country's fastest growth period

The end of World War II ended Japan's isolation in the global economy, prompting what's now called the "Japanese Economic Miracle." From the 1940s to the 1980s, Japanese policy makers enacted ultra-loose monetary policies that pushed a ton of cash into the market and fueled rapid growth. But these policies ultimately helped create a bubble and sent the country into a deep period of deflation.

Central bank independence is correlated with lower inflation on average

Executives may seek to influence the central bank to reduce interest rates for political points. Since its creation in the early 20th century, the US' Federal Reserve saw the most interactions from the president during the Nixon and Ford administrations.

An inverted yield curve has preceded every recession that’s occurred in the last 50 years

Prolonged yield curve inversions can predict recessions, but even brief inversions can cause investors to react with knee-jerk reactions.

Venezuela is experiencing hyperinflation

Consumer prices in the country have risen at a fairly quick rate since 1983, but a series of policy miscalculations, falling oil prices, and other factors have sparked extreme levels of inflation since 2017, with citizens losing faith in the value of the national currency.

Learn how 'real' and 'nominal' gross domestic product differ, with real GDP being adjusted for inflation and nominal GDP reflecting current monetary values.

Switzerland's currency is so strong that it could cause deflation

Economic instability in the United States in 2025 strongly benefited Switzerland, where the value of the franc relative to the dollar increased by about 12.7%. In response, the price of imports dramatically decreased, making goods overall much cheaper.

When consumers think an economic downturn is looming, the 'lipstick index' economic theory argues that sales of more affordable luxury items (such as lipstick) go up.

What is quantitative easing?

Quantitative easing was a relatively new method the Federal Reserve used to curb deflation during the Great Recession. In this process, a central bank digitally creates money that is used to purchase assets, usually government bonds. This lowers returns on low-risk bonds, encouraging investors to put their money in high-risk, short-term stocks, and moves money through the system.

Stablecoins could give people in high-inflation economies access to stronger currencies

Specifically, stablecoins could provide a way to make sure these funds remain valuable during times of volatility. Some examples of people without access to the US dollar using stablecoins as a store of value have been observed in Venezuela.

There's no single definition of an economic recession, though recessions are commonly identified by two consecutive quarters of shrinking gross domestic product.

In the 1970s, the US experienced a period of stagflation

It was characterized by high inflation, slow economic growth, and high unemployment. The crisis was triggered by a combination of factors, including loose monetary policy that spurred excess demand and spiraling oil prices caused by an OPEC embargo in 1973.

An updated, comprehensive tracker of global inflation

This tracker provides a visual narrative of inflation rates, central bank policies, consumer price breakouts, and more from nations across the globe.

'Floating rate' loans periodically adjust their interest rates in accordance with economic conditions

When the Federal Reserve began raising interest rates in 2022 to combat inflation, interest payments borrowers owed to private credit lenders increased accordingly. Private credit funds benefited as loan returns increased, making the asset class attractive to investors at the time.

'Buying the dip' refers to purchasing stocks or ETFs after a price decline in anticipation of a rebound

Some investors see it as getting a discount before the market recovers and the temporary declines turn into gains.

In 2023, the US money supply fell at its fastest rate since the 1930s

The money supply tracks how much cash, as well as electronic funds like savings accounts, is circulating through the economy. And a downward turn can be a bad sign.

'Deinfluencing' explained

You’ve probably heard of influencers, but have you heard of “de-influencers?” Basically, the de-influencing trend started when creators began making videos about products you shouldn’t buy, rather than sponsored content promoting things you should purchase. Comedian Taylor Tomlinson recently cracked some jokes about the trend, and its companion “under consumption-core.”

What are repurchasing agreements?

Repurchasing agreements are short-term trade agreements in which a dealer sells securities and agrees to repurchase them at a higher price soon after (often within 1 to 2 days). This gives dealers quick access to cash and allows the purchasing party, often the Federal Reserve, to control liquidity in securities. This can be used to alter the money supply, which is a key element in combating deflation.

Is Domino’s pizza inflation-proof?

A Big Mac Extra Value Meal is nearly $11 in 2025, compared to $4.59 in 1993. A Taco Bell crunchy taco costs $1.79 today, but was only 59 cents in 1990. Inflation impacts the price of many fast-food items—but the price of a Domino's pizza hasn't changed much at all in the past two decades.

The Fed can use quantitative easing to stimulate growth once it has lowered the federal funds rate as far as it can go

This involves purchasing large-scale assets from banks beyond just Treasury bills and bonds. This effectively gives banks much more liquidity, with the hope that they will actively lend it out at cheaper rates and expand the economy. But quantitative easing runs the risk of sparking inflation.

Roughly $5T of stimulus money flooded the economy during the pandemic

Recessions can last anywhere from months to years. To encourage economic growth, governments use policy levers such as lowering interest rates or introducing a stimulus. Economists credit massive stimulus funds for helping the economy quickly recover from a recession during the COVID-19 pandemic.

Series I bonds are a form of government savings bonds created to shield your investments from inflation

Specifically, I bonds earn interest from both a fixed rate and an inflation rate. This article explains who might benefit from investing in I Bonds—for instance, people seeking to invest savings they do not need to access in the near future.

Read about different levels of price discrimination

Price discrimination is a business practice in which different customers are charged different prices for the same product or service. It's one way for a business to boost profits and take advantage of its market position. There are three levels of price discrimination, differentiated by the consumers targeted and the reasons for discrimination.

Interest rates have historically been an indicator of the US economy's overall health.