Deflation

Deflation

Deflation

Deflation occurs when the inflation level falls below zero percent or almost zero like what was experienced in Europe. Deflation should not at any time, be confused with disinflation that refers to a slow-down in the inflation rate, that is, situations when inflation declines to lower levels. When inflation hits a country, the real value of money is adversely affected. Contrariwise, when deflation hit some of the European countries, it up surged the real value of money.

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It, therefore, means that, if prices continue to fall in the European continent means that Europe may slither into a deflationary spiral, even though the majority of central bank holders assert that it is unlikely.

References
Wall Street Journal-http://www.wsj.com/articles/europes-deflation-threat-eased-in-february.

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