2  Even when the zero bound is not binding, a fall in the rate of inflation raises real interest rates, thereby eroding the effects of any previous monetary easing. BIS Review 34/2003  3  A further fall in inflation: what is the likelihood? What, then, is the likelihood of a further, possibly substantial fall in inflation?
And, in particular, why worry about further disinflation when financial markets and forecasters seem moderately optimistic about economic recovery in the United States? As a starting point, we should note that underlying inflation has declined noticeably in the past year or so.