Inflation and deflation: Deflation in economy may mean wage cuts | Personal Finance | Finance


Although CPI has been increasing, some people are unsure about what will happen next. The rate of inflation soaring could be bad news for savers, but deflation could also have a negative impact.

Tim Bennet, Head of Education at Killik & Co, recently spoke about inflation and deflation, during a Kilik Explains episode on YouTube: “Now deflation you might think superficially, if you’re about to save money, is a great idea – but it isn’t. It does mean that prices fall, not just for single items but across the economy as a whole.

“It’s bad news because if consumers start to anticipate falling prices, they may stop spending, expecting to be able to buy things cheaper say a year from now.

“Deflation across the economy suggests that people should be negotiating wage cuts, not wage increases … psychologically if nothing else, that’s not something we’re used to.”

READ MORE: Rail fare rises could be curbed to stop passenger boycott

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