What does price stability indicate?

Price stability is an economic condition characterized by minimal fluctuations in prices over time. When price stability is achieved, it typically means that the overall level of prices in an economy does not experience significant increases (inflation) or decreases (deflation). This stability allows consumers and businesses to make long-term financial decisions with greater certainty, as they can predict costs and prices without fear of sudden changes.

In this context, the term "slow or no overall price changes" is crucial because it highlights that a stable pricing environment fosters economic confidence and supports sustainable growth. It contrasts sharply with concepts like rapid price changes, a complete lack of inflation, or frequent economic recessions, all of which would disrupt economic stability and undermine consumer and investor confidence. Thus, recognizing that price stability is synonymous with minimal price volatility reinforces the understanding that it is vital for a healthy economy.