The Economic Monster Called Deflation

Central bankers fear deflation so much that they want an inflationary cushion to prevent an economic shock or geopolitical crisis from sending low inflation into negative territory. 
Look out behind you, Mario Draghi! Photographer: Ralph Orlowski/Bloomberg

In part one of this series, I wrote about the deflation specter that is haunting Europe. Central bankers are so fearful of deflation that they want an inflationary cushion to prevent an economic shock or geopolitical crisis from sending low inflation into negative territory. The Federal Reserve, European Central Bank, Bank of England and Bank of Japan have inflation targets of 2 percent.

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