Sunday, April 5, 2009

Deflation... ?

... far from it. Plummeting WPI based inflation rates may have given the perception that prices are falling and the economy is entering deflation territory. But the reality with food prices (and here), as indicated by the graphics below, clearly points otherwise.

Update 1 (17/3/2010
Excellent article in the Times that captures the deep problem of deflation in Japan. It becomes even more devastating when the economy is in recession and interest rates are at zero-bound. Monetary policy becomes virtually toothless.

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