BOE'S BROADBENT FAIRLY SANGUINE ABOUT THE THREAT OF 'DEFLATION'
- Likelihood of broad and protracted deflation is pretty low
- The neutral real interest rate is more likely to rise than fall over the next couple of years
- Real Interest Rates still need to be low
- Past few months have so far seen 'good disinflation' in the UK
- Wages are expected to have picked up further Q1 2015
- Core Inflation Is Still Running At Over 1%
- Historically, there doesn’t look to be anything particularly bad about negative inflation
- The MPC tries to prevent prices from falling as well as ensuring 2% target is hit
- MPC needs to be vigilant for signs that 'Good' deflation is turning into something worse
- There is a risk of more generalized and sustained price drop
- The neutral 'Real Rate' of Interest has been extremely depressed
- With rates at zero lower bound, sustained deflation becomes a bigger problem
- Risk of persistent, widespread deflation is low and relatively contained
- With global interest rates at Zero Bound, central banks have been compelled to into utilizing unconventional policy tools
- Evidence suggests that unconventional policy is effective
- Asset purchases (QE) help soften the constraint of the Zero Lower bound
- With an independent and credible policy there’s a lower risk of de-anchoring expectations
- Sustained deflation more costly when interest rates close to the lower bound
- Currently Less Room Now For Central Banks To Move Against Entrenched, Persistent Deflation
- Nominal Income Growth Has Actually Risen Slightly Of Late
- Q4 2014 Saw Wages Grow At The Fastest Pace In 7-Yrs
- Little Evidence Here That Weaker Inflation Expectations Delay Or Depress Consumer Spending
- Base Effects Will Give A Big Positive Impetus to prices In Early 2016
- A Credible Monetary Policy Reduces The Persistence Of Movements In Inflation
- Deflation tends to be rarer in countries with a floating currency
- There's a risk that, by depressing wage growth, sub-target inflation could persist for longer than we expect