Published On: Fri, Dec 19th, 2014

Bond King Bill Gross, Nobel Laureate Paul Krugman See No Inflation

Bill Gross

For the first time in at least 55 years, not one advanced economy will see consumer prices growing more than 4 per cent this year, Bloomberg said on December 18.

When it comes to lowflation, 2014 will have proved to be a banner year. For the first time in at least 55 years, not one advanced economy will see consumer prices growing more than 4 per cent this year. Even as recently as 2011, a quarter of rich nations recorded a rate at or higher than that, the article said.

Indeed, across the Organization for Economic Cooperation and Development, average inflation excluding food and energy hasn’t breached 2 per cent since the start of 2009 – the longest stretch of weakness since data began 43 years ago. Furthermore, consensus forecasts for inflation have been trending down since late 2012, the lengthiest run of downgrades since the end of the 1990s, according to Bloomberg.

Such factoids, courtesy of a December 1 study by Citigroup economist Michael Saunders, highlight the world of lowflation, a term coined earlier this year by the International Monetary Fund to describe an extended period of ultra-low inflation. Looking forward, Saunders doesn’t see average inflation in any rich economy topping 3 per cent from 2015 to 2019.

It is that, more than Russia’s man-made economic implosion, which probably poses the biggest international concern for U.S. Federal Reserve policymakers meeting in Washington on Wednesday, Bloomberg said.

`NO! NO! NO!’ “The Fed is in a corner -it wants to raise rates in 2015 but Oil Dollar Disinflation say NO! NO! NO!!” billionaire investor Bill Gross of Janus Capital Group wrote on Twitter on Tuesday.

Citigroup and Nobel laureate Paul Krugman agree. Citigroup doesn’t see the Fed acting before next December, while Krugman said December 14 it could hold fire for the whole of next year as officials conclude “it’s a pretty weak world economy out there, we don’t see any inflation, ” the article said.

The betting is still that with US labor markets tightening and cheaper oil boosting purchasing power Chair Janet Yellen and colleagues will dump a pledge not to raise interest rates for a “considerable time.” The median estimate of economists surveyed by Bloomberg News is that will pave the way for the first US rate increase since 2006 in the third quarter of next year, according to the article.

 

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