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Deflation, in contrast to inflation, is a general decrease in the price of goods and services. More specifically, it happens when the rate of inflation is less than 0% or when, over time, the value of money increases.
Deflation definition
Deflation, in contrast to inflation, is a general decrease in the price of goods and services. More specifically, it happens when the rate of inflation is less than 0% or when, over time, the value of money increases.
It’s generally accepted that a sustained period of deflation has a detrimental effect on economy, as it creates an incentive for consumers to delay spending. For example, you probably wouldn’t buy something today if you’re sure that it will be cheaper next week.
There’s also a disincentive to borrow — affecting one of the primary functions of financial markets as deflation will increase the real value of any debt over time. Alongside this, the interest payments needed to service the debt will become comparatively more expensive.
With IG
We offer a share dealing service, allowing you to buy and sell shares and ETFs via a share dealing account or ISA.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA, a SIPP or an IG Smart Portfolio can fall as well as rise, which could mean getting back less than you originally put in. Spread bets and CFDs are leveraged products and can result in losses that exceed deposits. Spread betting and CFD trading are not permitted within the IG SIPP. Please ensure you fully understand the risks and take care to manage your exposure.
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