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Revision as of 10:43, 12 June 2020 by imported>Doug Williamson (Add quote. Source: Bank of England https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/covid-19-and-monetary-policy-speech-by-michael-saunders.pdf?la=en&hash=02111FB09D7C30180137C228BB61E8C5447A84F9)
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A situation in which inflation is positive, but very low, for example below the (positive) inflation target of the central bank.

The economic impacts of Covid-19 to date
"At present, if we overdo the stimulus somewhat and then find the economy recovers strongly, we have ample tools and time to tighten policy again before persistent excess demand and inflation become a problem ...
Conversely, if we provide too little stimulus, the economy could slip into a lowflation trap that is much harder to escape, with greater long-term costs from business failures and high unemployment."
Michael Saunders, External Member of the Bank of England's Monetary Policy Committee (MPC), May 2020.

See also