Banking Terms: Biflation

The simultaneous existence of inflation and deflation in an economy. Biflation, while seemingly a paradox, results when inflation in commodity assets coexists with deflation in debt-based assets. Biflation typically occurs when a fragile economic recovery causes the central bank to open up the monetary spigots in a bid to stimulate the economy. This may result in higher prices for certain assets such as energy and precious metals, and declining prices for leveraged assets such as real estate and automobiles.

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