I think it is basic concept but… I am confused with them… Could you explain what difference between them? As i read below sentences… I am being confused… ================================ Equities provide an inflation hedge when inflation is moderate. High inflation can be problematic because slow growth may result from central bank action. Declining inflation or deflation is harmful because this can result in declining economic growth. Increasing inflation is positive for cash instruments because the returns on cash instruments increase as inflation increases. Deflation is negative for cash because the return falls to zero.
i think decreasing inflation means the price still increase but at a decreasing rate. well deflation is decreasing in price
Equities act as a hedge against moderate inflation but unexpected inflation can harm as they will find it difficult to pass along the inflation to consumers without a sudden drop in revenues due to price increase. Unexpected inflation makes central banks to increase short term rates and makes cash investments attractive. In the presence of deflation, central banks are forced to drop interest rates to zero or near zero and makes it bad for cash investment but good for bonds. It is also bad for equities because consumers will refuse to buy goods and services when they believe that a with little wait they can get them at cheaper prices. It is bad for real estate because rental income will drop because of reduction in prices in the economy.