The MPC and the UK Economy: Should we fear the D-words? - speech by Charles Bean

In a speech to the Emmanuel Society today in London, Charles Bean, Chief Economist and Executive Director of the Bank of England, looks at two key aspects of the risks to the current economic conjuncture: those associated with deflation and debt.
Published on 25 November 2002

He argues that some of the more alarmist commentary about the threat of global deflation is overdone. Although Japan is already experiencing falling prices with zero interest rates, it is still a long way from falling into the sort of deflationary spiral that characterised the United States during the Great Depression. And while a sharp contraction in consumer spending would pose a threat to the US recovery, there are good reasons for believing that the US economy is unlikely to follow Japan into deflation. He views low inflation in Germany as, to a large extent, part of a process of regional relative price adjustment in the context of monetary union, rather than as the beginnings of a classic deflationary process.

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