Markets are cheering falling inflation. Experts say be careful what you wish for.

• Inflation has been cooling for several months, but markets and the economy would suffer if sharp deflation sets in.
• Deflation can eat away at company earnings and margins, which would drive stock prices lower. 
• Experts told Insider that greater purchasing power could benefit consumers, but weigh on markets. 

Inflation has plummeted from a blistering 9% last summer to 3% in June, and the stock market has rallied on hopes of a return to normalcy. But with prices still well above the Fed's target, policymakers have signaled more rate hikes are on the table.