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Category Archives: Deflation

QE too?

Yesterday, the US Federal Reserve announced that it was introducing its second round of quantitative easing, by pumping $600bn (£373bn) into its economy by the end of June 2011. Will the Monetary Policy Committee of the Bank of England follow suit? The answer for the meantime is ‘no’. Today they decided to keep interest rates on hold at 0.5% for … Continue reading

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Do falling markets and tighter liquidity signal a new Great Depression?

This seems a surprising prospect at the moment, but according to Telegraph.co.uk this morning, Andrew Roberts, head of European rates strategy at RBS, said: “Great Depression II” could now be approaching; adding: “It now has the potential to speed toward its conclusion; a European $1 trillion package which does little and political panic tells you we are about to reach … Continue reading

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Is price deflation being overstated?

Professor Greg Mankiw of Harvard University has just pointed out that the CPI figure in the US which has moved into negative territory, may be exaggerated because it is based on a “trimmed mean estimate”, which removes the large relative price changes in each month.   He says: “As every grade school student learns when the teacher reports results of … Continue reading

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Surprising inflation figures

The inflation figures released this morning took many analysts by surprise. The general view was that CPI inflation would fall to 2.0%, which would put it bang on the Bank of England’s target. However, CPI inflation did fall in May but only from 2.3% down to 2.2%. This continues to put us well above the EU average, which currently stands … Continue reading

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RPI inflation falls to minus 1.2% to record biggest drop since records began

In April 2009 the Retail Prices Index (RPI) fell from -0.4% in March to -1.2% in April. This was the biggest fall in prices since records began in 1948. The recent fall into negative territory for the RPI has been due to the huge cut in interest rates over recent months, as the Bank of England has reduced rates from … Continue reading

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UK out of step on inflation

Consumer prices in the OECD area rose by 0.9% in the year to March 2009, according to figures released yesterday. This represents a continued fall when compared with the 1.3% price level recorded in the year to February. When taken on a month-by-month basis prices rose by 0.3% in March following a rise of 0.4% in February. The recent trend … Continue reading

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RPI moves into negative territory

The Retail Prices Index (RPI) actually fell to -0.4% in March, compared with a figure of zero growth in February. This is the first time that this figure has been negative since 1960. There was a large downward pressure on the index from housing with the main contributions being house depreciation and mortgage interest payments, both of which are excluded … Continue reading

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Eurozone output down by nearly one-fifth in the last year

Industrial output in the 16 countries of the eurozone area fell by 2.3% in February compared to the previous month. Overall, this meant that when February’s output was compared with a year earlier it had fallen by 18.4%.   There has been a general cutback in industrial output as the recession has worsened and demand fallen. However, the fall in … Continue reading

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Deflation – coming to a country near you!

  US consumer prices fell in March by 0.1% on the previous month, and 0.4% on the same month a year ago. This is the first time that deflation has been seen in the US since 1955.   Deflation is of particular concern because it can persuade consumers not to buy now, but to wait for a bargain as prices … Continue reading

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Inflation: CPI up, RPI down to zero

Just published by the ONS at 9.30am today, the latest inflation figures show that the Consumer Prices Index (CPI) annual inflation  – which is the government’s target measure – rose by 3.2% in February. This was up from 3.0% in January.   This means that the CPI is moving away from the Bank of England’s 2.0% target, after the Bank … Continue reading

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