Deflation is the word used to describe falling prices. These are not necessarily a bad thing. They can, for example, be caused by rising productivity or reduced costs in an industry. But a period of sustained nationwide deflation can be very destabilising.
If consumers feel that prices are likely to fall over time, they tend to delay purchases (they hold cash with the expectation of being able to purchase the same goods at a lower price later). This pushes down corporate profits which, in turn leads to cost cutting and unemployment, which then reduces consumption further.
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Inflation holds steady at 3.8% ahead of BoE meetingThe rate of inflation did not rise in August, but the Bank of England is still expected to keep interest rates on hold tomorrow
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Thousands of savers with £250k pensions take cash over tax-free money and IHT fearsWith a record £70 billion withdrawn from pensions in the year to March, experts are concerned savers are making knee-jerk decisions without advice that could affect their long term wealth
