When there is lower demand, such as in developed nations where baby boomers are retiring, and demand for goods and services other than healthcare go down, and this thought to decrease the velocity of money in the system. The lower demand for goods and services result in lower prices and deflation.
This also correlates to the strategy of central banks to control the flow of money circulating in the system. Low interest rates cause more money to flow in the circulation. Hence, the Bangko Sentral ng Pilipinas watches inflation to guide it's interest rate policies. As long as inflation is down, the BSP can continue to keep rates low that causes more money to go into the system, which causes people to increase spending, and the demand for products should continue to go up or stay high.
When there's too much money in the system, too much demand and too little products and services, prices begin to go up, and hence inflation goes up, and the BSP will start raising interest rates to tighten the money flow and reduce the flow of money in the system, and hence, reduce buying power, demand and reduce prices, and curb inflation.
However, there are other factors, that might influence inflation or the rate of increase of products. World crude oil price patterns may affect the cost of goods sold, and hence the prices could go up if crude oil prices go up. Natural calamities may also lower agricultural output, causing supply to go down relative to demand, causing prices to go up and hence inflationary pressures. When the economy slows down, lower output of goods might cause prices to go up hence higher inflation, or the populace may choose to be more conservative in their spending, and prices may plummet causing deflation.
Inflation is only the result of demdpand and supply of goods, products and services.
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