Inflation-targeting would lower demand...

Economists think that deflation or lower prices make people delay spending which is against the sales logic that lower prices would help clear the market… During a sale or low price period the seller is expected to sell more. That is equivalent to say that higher prices or their expectation in the future would decrease demand and it might also increase savings which is against the spending reason. Higher inflation or inflation expectations in the future could also make people spend less, purchasing power goes down, number of goods and services relative to the money-quantity or amount in the hand goes down, and they also save more for the future. Economists say that the relative comparison between two nominal variables makes a real variable. Inflation hurts demand is very simple to understand when it can reduce demand by increasing the price-level. Simply, we know that lower prices increase demand and higher price reduce it (Tobin) which is true for both, the domestic economy and the external economy. Lower prices make you competitive in the market. Moreover, Pigou has also put his theory in a similar way that lower prices would increase real-wages thereby increasing demand. Ordinary people talk about nominal variables but an economist likes to look at the real picture, real-wages, real interest-rate, real-prices of assets, real GDP and so on, i.e., inflation adjusted values of variables. The central banks are trying to reduce unemployment by cutting on real wages, external devaluation to increase exports, and real interest rate through inflation to make businesses and investors spend more in order to clear the market but inflation targeting has also failed to increase domestic demand by reducing real wages and income to increase external demand at the expanse of the former at a time of global headwinds and slow recovery in the US. Inflation-targeting by the central-banks has reduced domestic demand by lowering real wage expectations and also increase savings, in the face of higher inflation, for the future.