Qualified advisers answering your
Financial Questions
call 0800 092 1245

The threat of deflation and what it means to you

The last couple of days have seen more and more mention of the dreaded deflation and the possibility that the UK and other economies around the world could fall into a serious depression. So what is deflation and what does it mean to you?

Deflation is the worst-case scenario in a recession which sees prices fall into a deep spiral whereby buyers hold off because they know that the price would be cheaper tomorrow, next week or next month. This pressure then forces businesses to reduce their costs and the labour force which further feeds the lack of money in the economy and more bargain hunters wait on the sidelines for prices to fall.

Traditionally the instrument of choice to correct this would be interest rates but at this moment if interest rates were to fall further the impact would be less and less on the consumer. If interest rates were to reach zero, which although unlikely is still possible, this instrument would be taken away from the government and a terrifying spiral of recession would lurch out of control. The trick to avoiding a depression is to make a recession as short lived and the bounce as strong as possible.

Share this..

Related stories

Financial Guides

Financial Calculators

Our useful calculators can help you get your finances in order:

Latest News


Helpful new tax year facts that could affect you and your money

Blog | Seven helpful new 2016/2017 tax year facts that could affect you and your money. Our recent online blog shares a brief outline on how to stay up to date.

Read more

Useful Links

Popular Searches

Please Enter More Details

Enter More Details