deflation

noun
de·​fla·​tion | \ di-ˈflā-shən How to pronounce deflation (audio) , ˌdē-\

Definition of deflation

1 : an act or instance of deflating : the state of being deflated
2 : a contraction in the volume of available money or credit that results in a general decline in prices
3 : the erosion of soil by the wind

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Other Words from deflation

deflationary \ di-​ˈflā-​shə-​ˌner-​ē How to pronounce deflationary (audio) , ˌdē-​ \ adjective

Examples of deflation in a Sentence

Economists worry that deflation will bring the country into recession.

Recent Examples on the Web

While many rallied against Mr. Trump's official state visit to Britain, one supporter stabbed the baby blimp with a sharp object that resulted in its deflation. CBS News, "Trump U.K. state visit: Trump U.K. state visit: Pro-Trump activist stabs "Trump baby" balloon in London," 4 June 2019 The Fed wants to maintain a healthy buffer against deflation, a problem that racked Europe and Japan in recent years and that central bankers view as more challenging to address than inflation. Paul Kiernan, WSJ, "Inflation Fell Below Fed’s Target in November," 21 Dec. 2018 Even Japan, once the poster child for economic failure, is making progress in its fight against deflation. Bloomberg.com, "Where Can You Invest to Take Advantage of Synchronized Growth?," 3 Apr. 2018 But the trend from deflation to inflation appears to have begun over a year ago. Justin Lahart, WSJ, "‘Stuff’ Really Is Getting More Expensive," 13 Feb. 2019 And new orders for manufacturers overall are once again growing much slower than production—as in 2014 to 2016, when China was mired in industrial deflation. Nathaniel Taplin, WSJ, "Chinese Overcapacity Returns to Haunt Global Industry," 10 Jan. 2019 Barring a jolt from a 2014 tax increase, consumer prices have been stubbornly sticky—although Japan is at least no longer enduring deflation. Mike Bird, WSJ, "Japan’s Markets Have Been Transformed by the Overwhelming Abenomics Wave," 20 Sep. 2018 Debts mount because everyone, rather than just the strong, is encouraged to borrow and spend, the exact opposite of what debt deflation should inspire. WSJ, "Raising Rates to Cure a Recession You Cause," 3 Dec. 2018 In 2015, the Fed was willing to hold fire to let China fight off large-scale capital outflows and a debt-deflation trap. Nathaniel Taplin, WSJ, "U.S. Inflation Data Key to Global Markets’ Next Moves," 11 Oct. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'deflation.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of deflation

1891, in the meaning defined at sense 1

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Statistics for deflation

Last Updated

17 Jun 2019

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Time Traveler for deflation

The first known use of deflation was in 1891

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More Definitions for deflation

deflation

noun

Financial Definition of deflation

What It Is

Deflation describes the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money. It is the opposite of inflation, but is not the same as disinflation (which is the slowing of inflation).

How It Works

Any way you slice it, deflation is caused by a significant drop in demand. Lots of things can cause this decrease in demand: recession, tighter monetary policy, civil unrest, terrorism, or changes in laws are common triggers. Many economists believe that these causes are often accompanied by a heavy psychological element. As consumers and companies grow more pessimistic about the economy or their standard of living, they tend to hoard cash instead of spending it. Likewise, banks tend to slow their lending and companies delay their expansion plans. These reductions in spending and lending lead to a decrease in the demand for goods and services. Less demand means producers, retailers, and other sellers of goods and services must lower their prices to entice buyers.

Although less expensive goods and services may seem like a good thing for consumers, it only marks the beginning of deflation's damaging downward spiral. The following sequence describes the dangers of deflation and the dangerous cycle it can create:

Why It Matters

Although many people laud lower across-the-board prices, prolonged periods of falling prices can wreak havoc on the economy by starting a downward economic spiral, resulting in fewer jobs, less income and a potential period of recession. Because the government can have such a tremendous impact on the economy in this vein, central banks like the Federal Reserve keep a close eye on economic measurements that will alert them of the threat of deflation.

Source: Investing Answers

deflation

noun

English Language Learners Definition of deflation

: a decrease in the amount of available money or credit in an economy that causes prices to go down
: the act or process of letting air or gas out of (something)

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More from Merriam-Webster on deflation

Spanish Central: Translation of deflation

Nglish: Translation of deflation for Spanish Speakers

Britannica English: Translation of deflation for Arabic Speakers

Britannica.com: Encyclopedia article about deflation

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