lowinflation

Lowinflation is a macroeconomic condition in which the general price level rises at a low, stable rate over time. It is commonly measured with consumer price index (CPI) or other price indices such as the personal consumption expenditures price index (PCE). In many advanced economies, a low inflation regime is characterized by inflation near the central bank’s target, often around 1 to 3 percent per year. Low inflation is distinct from deflation (negative inflation) and from disinflation (a decline in the rate of inflation).

Causes and drivers include credible monetary policy that anchors expectations, slower growth in demand, productivity gains, technological progress, global competition, and stable energy prices. Structural factors such as aging populations and higher labor market slack may also contribute to low inflation. Measurement difficulties can obscure true price changes, as volatile food and energy prices and quality improvements influence reported inflation.

Implications of low inflation include greater price stability, lower uncertainty for households and businesses, and reduced debt burdens in real terms when growth is weak. They can also coincide with sluggish economic growth or higher unemployment in the short run, raising debates about the trade‑offs between inflation and unemployment. Central banks typically aim for a positive but low inflation rate, commonly around 2 percent, using tools such as policy rate adjustments and asset purchases to prevent inflation from undershooting targets and to preserve real monetary stimulus when needed.