Stephen Roach is worrying about deflation when there isn't any and trying to pretend that 0.8% inflation [by 2003] is scarily close to deflation.
The last I heard, it's quite nice to have near-zero inflation. They worry if it's over 3% and call it dangerously close to deflation at 1%.
There is no deflation. It isn't as though 0.1% deflation is any issue. There is no sudden switch at 0 like a light going on or off. -1%, +1%, yawn!!
<If, in fact, the current inflation cycle conforms to those of the past, a subtraction of 1.5 percentage points would take the overall inflation rate down to 0.8% by early 2003. While that stops short of outright deflation, it is dangerously close, nonetheless. And such an outcome would also undercut our baseline forecast of 1.0% GDP-based inflation for early 2003. Interestingly enough, we see less of a deflationary risk in Europe than in the United States. Our baseline forecast calls for a 1.4% inflation rate in Europe in 2002, 0.3 percentage point above our 1.1% forecast for the US. But it could well end up being a close call on the deflationary watch for Europe, as well. >
Uncle Al has got things going along nicely.
Mqurice |
