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