Both can—but deflation often causes a dangerous spiral. When prices fall, businesses earn less and may cut jobs. Fewer jobs mean less income, which reduces spending further, causing more price drops. This cycle discourages investment and slows the entire economy. Inflation spirals, on the other hand, cause panic buying and hoarding, especially in hyperinflation cases.

But deflation is often more feared because it’s harder to reverse. Central banks prefer mild inflation because it encourages spending, growth, and debt repayment. Too much of either, however, disrupts stability.