Global Deflation Risks in 2009

Just a few months ago, the prospect of stagflation loomed over the global economy. Economic growth was rapidly slowing down because of the financial crisis, while commodity prices hit unprecedented heights, creating sharp inflationary pressures in Singapore and other economies. Since then, a confluence of factors such as declining oil and commodity prices and the global economic slowdown has resulted in rapid falls in the inflation rates of many economies, thereby raising the spectre of deflation. This box discusses issues related to the causes and costs of deflation drawing from past experiences of deflation.

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