10/08/2024
Which Is Worse, Inflation or Deflation?
Deflation is worse than inflation, because it can cause a downward economic spiral that leads first to a recession and then possibly to a depression.
The Bottom Line
Interest rates and inflation tend to move in the same direction but with lags, because policymakers require data to estimate future inflation trends, and the interest rates they set take time to fully affect the economy. Higher rates may be needed to bring rising inflation under control, while slowing economic growth often lowers the inflation rate and may prompt rate cuts. The Fed targets a range of the federal funds rate, in part, by setting the rate it pays on banking reserve balances.
follow lieutenants capital for more insights
