Bank of England's Ben Broadbent talks deflation in London

  • Likelihood of broad and protracted deflation in UK is pretty low
  • Good deflation helping boost demand and output
  • Will watch for signs of price falls hitting wage growth
  • Says inflation is likely to rise quite steeply in early 2016 due to base effects
  • Policy shouldn't overact to low inflation
  • Real interest rates still need to be low
  • The neutral real interest rate is more likely to rise than fall over the next couple of years
  • 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
  • With rates at zero lower bound, sustained deflation becomes a bigger problem
  • 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
  • Q4 2014 Saw Wages Grow At The Fastest Pace In 7-Yrs
  • Little Evidence Here That Weaker Inflation Expectations Delay Or Depress Consumer Spending
  • 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

Another H/T to Harry at Livesquawk for saving me the trouble of plowing through his speech to pull the details out

We're 4 for 4 for being let down by central bank speakers so far

Really it's 5 for 5 as Bank of Italy's Visco sneaked up earlier saying there's a risk of deflation in Italy