Which effect does insufficient inflation have on consumer spending?

Insufficient inflation typically leads to reduced demand as consumers may choose to delay spending. When inflation is low or stagnant, it can create a perception of economic uncertainty and a lack of urgency to make purchases. Consumers might anticipate that prices will remain the same or decline, prompting them to hold off on their spending in hopes of getting a better deal later. This behavior can stem from concerns about job security or a desire to save more in an uncertain economic environment.

Additionally, when inflation is insufficient, these conditions may signal slower economic growth, which can lead consumers to make more cautious financial decisions. This financial behavior can have the broader effect of stalling economic momentum, as consumer spending is a significant driver of economic activity.