The rapid fall in inflation in a context of a financial crisis and a very sharp economic slowdown raises the spectre of deflation, a situation where the decline in prices is associated with a prolonged and severe economic crisis.
However, not all declines in prices are synonymous with defl ation; the distinction must be made between a defl ationary situation and the much more positive disinflationary situation.
Source: Banque de France, Focus n°3, 22 January 2009
Published on 20 December 2010. Updated on 12 September 2019