On the risk of long-run deflation

•Two-state, natural interest-rate model of long-run inflation.•Monetary policy is influenced by zero lower bound risk.•ZLB risk increases deflation risk.•Long-run US inflation ranges from −1.8% to +1.2% p.a.

I determine expected long-run inflation in a two-state New Keynesian model driven by natural interest-rate uncertainty. Monetary policy switches between discretion in 'normal times' and zero-lower-bound episodes when it is passive. Long-run US inflation ranges from −1.8% to +1.2% p.a.