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Deflation, or indeed the threat of deflation is supposed to defer spending as people wait for prices to fall before making purchases. With inflation at or very near to 0% the risk of deflation is high.
Economists and the Bank of England are divided on how to address the threat of deflation. Traditionally a rise in interest rates will cool inflation and the economy with it. And a cut stimulates the economy as it drives up demand. So what to do.
It seems shoppers may have rescued the economists from their dilemma and……gone shopping. As the FT reported:
“Britons went on a shopping spree last month as prices on the High St fell by the most on record, dispelling fears that the UK is on the brink of a deflationary downward spiral”
Hooray for the Great British shopper!!!