After a long period in which the desired direction for inflation was always downward, the industrialized world's central banks must today try to avoid major changes in the inflation rate in either direction.

No one will lend at a negative interest rate; potential creditors will simply choose to hold cash, which pays zero nominal interest.

Deflation can be particularly dangerous when a financial system is shaky, with household and corporate balance sheets in poor shape and banks undercapitalized and heavily burdened with bad loans.

Ben Bernanke Quotes