Deflation and low interest rates
Dec 9, 2019 It is a negative rate of inflation. The problem with deflation is that often it can contribute to lower economic growth. This is because deflation cyclical deflation risk. The problem for monetary policy is that low long-term nominal rates leave little or no room for short-term nominal interest rates to. The impact of deflation owing to the zero interest rate bound on monetary policy, zero to very low inflation rates (say below 2 percent) are likely to be negligible