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Transient computing has become popular in public cloud environments for running delay-insensitive batch and data processing applications at low cost. Since transient cloud servers can be revoked at any time by the cloud provider, they are considered unsuitable for running interactive application such as web services. In this paper, we present VM deflation as an alternative mechanism to server preemption for reclaiming resources from transient cloud servers under resource pressure. Using real traces from top-tier cloud providers, we show the feasibility of using VM deflation as a resource reclamation mechanism for interactive applications in public clouds. We show how current hypervisor mechanisms can be used to implement VM deflation and present cluster deflation policies for resource management of transient and on-demand cloud VMs. Experimental evaluation of our deflation system on a Linux cluster shows that microservice-based applications can be deflated by up to 50\% with negligible performance overhead. Our cluster-level deflation policies allow overcommitment levels as high as 50\%, with less than a 1\% decrease in application throughput, and can enable cloud platforms to increase revenue by 30\%.