Tuesday, October 25, 2005
Bernanke and deflation
Posted by David Smith at 12:00 PM
Category: Thoughts and responses

The appointment of Ben Bernanke as Federal Reserve Board chairman has been widely welcomed, including by Mervyn King in a personal statement from the Bank of England. Some fear that Bernanke is too much of a dove - he has already said he does not think "core" inflation in America is rising, and cite his willingness to jump on the deflation bandwagon a couple of years ago. A closer reading of that deflation speech, which in fact was in November 2002, suggests that is a little unfair. He made clear he was not predicting deflation, merely highlighting the risk.

Comments

Reading your article last week on no inflation to worry about.

Energy, housing council tax insurance are all excluded from the figures. please look at the attached article your comments would be welcome.http://www.financialsense.com/stormwatch/2005/1028.html

Posted by: roger parker at October 29, 2005 05:11 PM

Energy, housing, council tax and insurance are all included in the RPI, which shows a falling rate of inflation (beyond the direct effects of lower interest rates). Energy and insurance are included in the CPI. There's always an argument about inflation being understated. In fact, there is a good case to be made for it being overstated. The people who collect price information for inflation indices do not seek out bargains, unlike real consumers. The argument you referred me to is a standard, and fairly simplistic, monetarist approach.

Posted by: David Smith at October 29, 2005 05:52 PM