Expectations of deflation prove inflated

[CHIMO]

A month ago, the experts were predicting an era of deflation once the retail price index (RPI) was published. I cast doubt then, and do so now, on this analysis. The danger for the British economy is inflation, not deflation.

This morning's press was again full of the experts predicting a negative rate for the RPI. The guesstimates were for a fall of between 0.5 and 0.8%. (RPI is the oldest and most comprehensive index. It excludes only some atypical households.) For the second month running, the experts are wrong. The RPI registered for February an overall nil increase in prices.

Examine the inflation target set for the Bank of England. The Bank's target for the Consumer Price Index is 2%. In January, it was 50% above this level but it still did not stop the commentators shouting about deflation. Last month, it had risen to 3.2%. It will be interesting what the governor says in the letter he now has to write to the Chancellor.

Look at the other indices as well at the Consumer Price Index. The RPIX, which excludes mortgage interest payments, rose from 2.4% to 2.5%. The core-CPI inflation rate – excluding energy, food, alcoholic and tobacco – rose for the third consecutive month, up from 1.1% to 1.3%, and now stands at 1.6%.

http://www.guardian.co.uk/commentisfree/2009/mar/24/frank-field-inflation-deflation

[soothsayer]

1. time will tell

talk is cheap

[bemildred]

2. Some things deflate, some things inflate. It's messy.

Bubbles pop. Shortages, real or imagined, cause price increases. The two scenarios are not incompatible.

[CHIMO]

3. An Article

That I bumped into yesterday on LBN.
http://www.financialsense.com/fsu/editorials/amerman/2009/0318.html

[bemildred]

4. That's not bad. nt

[Lydia Leftcoast]

5. How can we have deflation if our govt. is printing money,

which usually causes inflation?