Is low inflation bad?

Even if inflation (CPI less food and energy) stays steady between 1% and 2%, there really is no problem. Prices are still rising.

Paul Krugman would like to see inflation rise because that would lower real interest rates. But that is not going to happen, and he shouldn’t be expecting that it will.

Is there a danger of deflation? No… Inflation will stay steady and low. But then, is there a danger of deflation in a subsequent recession? Yes, there is a danger, but prices will bounce back. The US does not have the same demographics as Japan.

The problem in the economy is not inflation. Most Americans are just plain and simple not making enough money. So why don’t we have deflation? Business is providing goods and services at stable prices. Consumers don’t have the money to pull prices up, and prices have a strong resistance to go near zero percent inflation. Prices will remain stable.