What is Biflation?

Biflation is an unusual situation in an economy where inflation and deflation exist simultaneously. When both inflation and deflation exist at the same time in an economy, Biflation has occurred. Osborne Brown, a Senior Financial Analyst coined the term "Biflation" in 2003. It is a situation whereby some prices are rising while some are falling simultaneously in an economy. Sometimes called mixed inflation, a biflation occurs in a fragile economy.

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Why is Biflation Important?

A state in an economy where some assets have higher (rising) prices and some declining (falling) prices is referred to as Biflation. This is a rare occurrence in the economy. A good example of biflation occurred in the United States after the Great Recession when the central bank in an attempt to stimulate the economy released monetary spigots which led to the economy experiencing deflation in some sectors and inflation in others. For instance, the real estate saw deflation while energy and precious objects saw inflation. From 2009 through 2012, different sectors witnessed rising and falling in price simultaneously.

Causes of Biflation

It has been projected that biflation is a rare or unusual economic situation which might likely not happen again. The major factors that led to biflation include the following;

• Markets and economic events and patterns after the 2008 great recession, which led to an utmost decline in the economy, especially in the housing sector.
• The unleashing of trillions of dollars in the economy by the Federal Reserve in an effort to keep the economy afloat. This led to prices in some sectors of the economy rising while prices in others were falling.