Will central banks inflate money further to create price inflation?
*Forbes, by Javier Espinoza, January 5, 2009:
"Monetary policy makers talk about cutting rates further for price
stability, but central banks might need to pump money into the
corporate sector.
With the industrial economies of the West suffering a deep and long
recession, officials from the Federal Reserve and the European Central
Bank are taking action to stave off deflation, marking a U-turn from
the central banks' concerns about increasing inflation just a few
months ago.
An alarming rise in commodity prices, particularly oil, brought
distress to European consumers last year and prompted expectations of
inflation to reach 4.4% in the United Kingdom. (See "Europe Bit By
Inflation Bug.") But a dramatic drop in crude costs, spurred by weak
demand, is now bringing fears of the opposite malady, pushing monetary
policy strategists to move swiftly.
Both Janet Yellen, president of the San Francisco Federal Reserve Bank,
and Lucas Papademos, vice president of the ECB, highlighted the risks
of deflation at the annual meeting of the American Economics
Association in San Francisco on Sunday. 'It is increasingly likely that
inflation will fall to undesirably low levels,' said Yellen, adding
that the Fed would likely expand its raft of unconventional monetary
policy measures now that its cycle of interest rate cuts has hit rock
bottom."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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