A look at survey measures of inflation expectations from three and six months after the announcement of QE2 show that disinflationary
pressures abated after the program's introduction.
In the near term, real wages and consumer spending will be boosted by the disinflationary
effect of the oil price shock.
Bundesbank stalling on quantitative easing allowed the disinflationary
process to proceed unabated when it should have been cut short.
The short-term expectations measures are mixed; SPF expectations for the CPI one year ahead have signaled a disinflationary
outlook, while expectations for other measures, such as SPF 1-year core CPI expectations and UM 1-ycar inflation expectations, have been more stable.
This was not an issue in the disinflationary
environment of the last decade, but it is becoming more of one, which is probably what prompted World Bank President Robert Zoellick's proposal to restore a role for gold.
Furthermore, the increase in the adjusted CORE2 inflation rate was driven by the prices of goods and services that are sensitive to the movements in the RON/EUR exchange rate, as their influence was only partly mitigated by the disinflationary
effects from the persistent demand shortfall.
I would still expect food prices to tail off a little bit later this year and food inflation to fall away and a disinflationary
process towards the end of the year," said Daniel Kaye, senior economist at the National Bank of Kuwait.
Positions in inexpensive risk assets that could benefit from ongoing growth - developed equities in particular - clearly still need to be balanced by holdings in assets that offer some exposure to disinflationary
news, in our opinion.
75 percent, and further rate cuts cannot be ruled out on the back of expectation for a gradual disinflationary
Meanwhile, the full disinflationary
impact of the large amount of spare capacity has not been felt yet," she said.
He said the Monetary Policy Committee (MPC) had recently voiced concerns that inflation had been slower to fall than anticipated, indicating the recession might not be as disinflationary
The real question is how far the current food inflation will offset the otherwise disinflationary
effects of retail competition.