A decrease in the general price level of goods and services (asset and consumer prices) over a period of time. This state of price development, which is typically associated with a contraction in the supply of money and credit in an economy, arises when the inflation rate turns negative, falling below 0% (hence, deflation is also known as negative inflation).
By nature, inflation reduces the value of money over time, but when deflation suddenly occurs, the value of money picks up. Deflation expectations do also play a role in the development of a market price direction, as consumers tend to wait for further lower prices in the near future.
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