Deflation?

Some economists now speculate that the consumption slowdown, with lower demand and subsequent price declines for fuel, could lead to deflation. This makes sense in the short term, as retailers trim prices to attract demand, housing stock continues to sit and get fatter, and consumer confidence is dead. However, low lending rates and money being pumped into corporate America will drive a recovery at some point. When that happens, the Fed will need to decrease the supply of money to avoid inflation, driving interest rates back up. Higher rates and lower liquidity will quelch a recovery. Either way, it will be tough going through 2010.