Increased real interest rates. Interest rates can’t fall below zero. If there is deflation of 2%, this means we have a real interest rate of + 2%. In other words saving money gives a reasonable return. Therefore, deflation can contribute to an unwanted tightening of monetary policy. This is particularly a problem for Eurozone countries which don’t have recourse to any other monetary policies like quantitative easing. This is another factor that can lead to lower growth and higher unemployment.