USA Today gives credence to the silly view that moderate rates of deflation pose some special problem for the economy. If prices fell at a moderate rate (e.g. less than 1.0 percent annually), it would be a negative factor for the economy, but the drop in the inflation rate from a positive 0.5 percent to a negative 0.5 percent is no more harmful than a reduction in the inflation rate from 1.5 percent to 0.5 percent.
Given the high level of indebtedness of consumers, a moderate rate of inflation (e.g. 3.0-4.0 percent) would be highly beneficial for the next several years. However, zero holds no particular magic and modest rates of deflation are not qualitatively different than low rates of inflation in their impact on the economy.
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