From ACT Wiki
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.